Mumbai: The International Finance Corporation, the private sector lending arm of the World Bank, will provide $450 million in loans to the Tata group's $4.2 billion coal-fired power plant at Mundra, Gujarat.
The World Bank board approved the loan for the 4,000 MW coal-fired power plant, despite calls by environmental groups to wait for further analysis of the costs and environmental impact of the plant.
The Mundra power project will cater to electricity needs in five states in western and northern India.
The plant would use "super-critical" technology, making it the country's most efficient coal-fired plant, with carbon emissions 40 per cent less than that of existing coal-fired plants in the country.
"This is an important project because we believe it will encourage other developing countries to make responsible choices, using best available technologies and applying higher environmental and social standards," Rashad Kaldany, IFC director for infrastructure, said.
Environmental groups say "the IFC has not demonstrated that this project is an appropriate and cost-effective solution that merits the investment of scarce international funds."
The IFC said it was responding to India's enormous need for more and affordable electricity, while also supporting new technology that reduced emissions.
Environmental groups also counter IFC arguments about coal's cost advantages, which, they say, has largely vanished with rising prices. The construction costs for "super-critical" coal-fired power plants had also escalated, they point out.
They said research showed there were economically feasible alternatives to coal, including solar thermal power, which would fit the region surrounding the Tata Mundra project.
Tata Mundra project could qualify for $445 million a year in payments under the Kyoto Protocol's Clean Development Mechanism (CDM) to recover the cost differences between solar thermal and supercritical coal, the group added.