The project will contribute to the industrial development and living standards in the state, the Ministry of Finance said in the statement.
"The objective of the project is to strengthen the capability to respond to a fluctuation in supply and demand of power and to improve the stability of the power supply by constructing the pumped storage facilities," the Ministry said.
The Japanese Official Development Assistance loan agreement was signed here between Ministry of Finance Additional Secretary C.S. Mohapatra and Japan International Cooperation Agency (JICA) New Delhi Chief Representative Katsuo Matsumoto.
"This further consolidates and strengthens the strategic and global partnership between India and Japan," the statement said.
(With inputs from agencies.)