This was announced by Werner Liepach, ADB''s Country Director during a signing ceremony held here on Wednesday.

Wajid Ali Rana, Secretary of Economic Affairs Division (EAD) was also present on the occasion.

"The new barrage will reduce water leakage and lessen flood risks in an irrigated agricultural area of about 1.2 million hectares, which will in turn help ensure prosperity of a large number of farming families," Werner Liepach disclosed.

"Similarly, the power projects to be completed by June 2016 will augment the network and improve performance of the transmission system, which is critical for increasing the overall energy efficiency and bridging the widening energy gap in Pakistan," he added.

The new Khanki Barrage on River Chenab in central Punjab will replace the existing headwork built in 1892.

The repayments to this concessional loan being given for improvement of irrigation systems would be due within a period of 25 years with a 5-year grace period and the rate of return would be 1.2 percent.

The condition of this vital headwork has deteriorated over the years, threatening the water supply to a large area of irrigated plains in Punjab considered to be the country''s breadbasket.

Current estimates suggest about 447 million cubic metres of water are losing each year due to the existing barrage''s shutter gates.

The new barrage will connect the Lower Chenab Canal with a new head regulator through a lead channel, ensuring a reliable flow of water to the Canal and increasing the flood-bearing capacity of the structure.

The new barrage is expected to benefit two million people directly or indirectly, boosting economic activities of more than 568,000 farming families depending on the Lower Chenab Canal, where the average farm size is 2.65 ha (6.5 acres).

The Khanki Barrage Project is the second tranche of a $900 million multi-tranche finance facility for the Punjab Irrigated Agriculture Improvement Programme and is funded through the Asian Development Fund.

The third tranche of the Power Transmission Enhancement Investment Programme includes expanding of grid stations and laying new inter-provincial transmission lines to upgrade the national grid system.

The MFF was approved in 2006 to invest $800 million in priority areas to improve transmission systems and help Pakistan meet its pressing energy needs.

Funds for the power sector project come from the ADB''s Ordinary Capital Resource loans.