"The current project is part of the Bank's long term partnership with Power Grid, initiated when the company was established in 1989.

"During this period, the Bank has assisted Power Grid to achieve world-class operations and management by financing $2.37 billion of its investment programme and supporting its progress towards strengthening its technical capabilities, improving corporate governance, enhancing institutional capacities, and diversifying its business lines."

Despite a booming economy, India's growth potential is constrained by inadequate electricity services and limited power generation and supply infrastructure, the World Bank noted.

Over forty percent of the population is without electricity, and the cost of erratic and insufficient power supply is high for industry as well as households, which causes 60 percent of Indian firms and a large percentage of homes to rely on captive or back-up generation.

The power sector has improved in recent years, albeit in an environment where demand for electricity continues to outstrip supply.

The Electricity Act of 2003 brought together structural and regulatory reforms designed to foster competitive markets, encourage private participation and transform the state's role from service provider to regulator. PSDP IV will facilitate these objectives of the Act, the Bank said.