REC- 1-51.p65 - Rural Electrification Corporation Ltd.

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The performance orientation built into the R-APDRP is
expected to incentivise and accelerate investments in
distribution infrastructure, and result in faster
accomplishment of loss reduction goals.
Policy Environment in Power Sector
The power sector reforms have evolved over a period of time.
The introduction of Electricity Act, 2003 modified the legal
framework governing the electricity sector, and set the stage
for attracting capital for large scale power projects. The
National Electricity Policy, was notified in February 2005,
which defined the broad goals with the following key
features (i) access to Electricity for all households in the next
five years; (ii)energy and peaking shortages to be overcome
and power demand to be fully met by 2012 (iii) Supply of
reliable and quality power of specified standards in an
efficient manner and at reasonable rates (iv) Minimum
lifeline consumption of 1 unit / household / day as a merit
good by year 2012 (v) Financial turnaround and commercial
viability of the electricity sector; and (vi) Protection of
consumer interests. The National Tariff Policy was notified
in January 2006, which aimed to ensure financial viability
of the power sector, attract investments, ensure availability
of electricity to consumers at reasonable rates, and promote
transparency and consistency in regulatory approach for
tariff setting. An Appellate Tribunal for electricity also
became functional since July 2005. Further, distribution
reforms were identified as the key area to bring about the
efficiency and improve financial health of the power sector.
Among other various initiatives, the GoI approved a scheme
called “Accelerated Power Development and Reforms
Programme (APDRP)” in March 2003 which has been relaunched
as R-APDRP by making it more performance-based
and financially attractive. The Rural Electrification Policy
was notified in August 2006, with the objective of improving
access and quality of electricity supply in rural areas to
ensure rapid economic development by providing electricity
as an input for productive uses in agriculture, rural industries
etc. The Rajiv Gandhi Grameen Vidyuthikaran Yojana
(RGGVY) which was launched by the Government of India
in April 2005 aimed to establish (i) Rural Electricity
Distribution Backbone (REDB) with at least a 33/11 KV substation;
(ii) Village Electrification Infrastructure (VEI) with
at least one Distribution transformer in a village or hamlet;
and (iii) Stand alone grids with generation where grid supply
is not feasible. Subsidy towards capital expenditure to the
tune of 90% is canalised through REC, which is a nodal
agency for implementation of the scheme. Electrification of
un-electrified Below Poverty Line (BPL) households is
financed with 100% capital subsidy @ Rs. 1500/- per
connection in all rural habitations as per Kutir Jyoti norms.
The Management of Rural Distribution is undertaken through
franchisees. A three-tier quality monitoring has been built
into the scheme. RGGVY has thus resulted in huge
investments in providing electricity connections in rural
India.
The regulatory environment has been quite dynamic in
enabling the power infrastructure sector. During the year
CERC amended the interstate Open Access regulations
keeping in view its importance in carrying forward reforms
in power sector. CERC also notified the Transmission License
Regulations, 2009 which stipulate that the empowered
committee shall identify the projects to be developed under
the competitive bidding guidelines, as well as specify the
41st ANNUAL REPORT 2009-10
eligibility criteria, procedure and the terms and conditions
for the grant of transmission license. CERC also notified Tariff
Regulations for electricity generated from Renewable Energy
sources, which are expected to promote new investments
so that renewable electricity supply could expand. The
normative Return on Equity has been specified at 19% (pretax)
per annum for the first 10 years and 24% (pre-tax) per
annum from 11th years onwards. Steps have also been taken
to address the issue of mismatch between renewable
resources availability in the local region and the renewable
purchase obligations, as also to implement the Renewable
Energy Certificate (REC) mechanism as an alternative route
for fulfilling renewable purchase obligations.
The above policy initiatives have addressed multifarious
issues concerning the power sector in India and will continue
to guide it to higher levels.
2. OPPORTUNITIES
The 11 th plan period (fiscal 2008-2012) target investments
in power infrastructure stand at 10316 Billion INR. CEA
estimates addition of 100000 MW generation capacity during
the 12 th plan period (fiscal 2013- 2017) which together with
related transmission and distribution infrastructure is
estimated to require funding of over 11000 Billion INR.
Therefore the power sector is expected to remain vibrant
and attract significant investments in the foreseeable future.
As a nodal agency for monitoring and channelizing funds
under the RGGVY programme REC continues to take up the
socio-economic responsibility of village electrification and
contribute to the mission of ‘Power for all by 2012’.
3. PRODUCT-WISE PERFORMANCE
REC as a leading Public Financial Institution provides
interest bearing loans to SEBs, State Power Utilities/State
Power Departments and Private sector for development of
all segments of Power infrastructure. The Company has
already devised and continuously modifies/updates/extends
loan portfolios to suit the emerging requirements of the
borrowing power utilities.
During the year, the Company has sanctioned loan assistance
of Rs.45,357 crore and disbursed Rs.27,127 crore (including
subsidy of Rs. 5,995 crore under RGGVY) in line with the
mandate given by the Govt. enlarging the areas of operation
of the Company to cover financing of all projects in Power
Sector. The major component of the sanctions of the
Company was for Generation schemes with total sanction
amount of Rs.24,031 crore. In addition an amount of Rs.
16,881 crore under Transmission and Distribution (T & D)
schemes, Rs.4,090 crore under Short Term Loan, Rs.319 crore
under IC & D projects and Rs.35 crore under RGGVY were
sanctioned. The disbursement includes Rs. 8,349 crore under
Generation, Rs.8,405 crore under T & D schemes, Rs.3,790
crore under Short Term Loan and Rs. 6,583 crore (including
subsidy of Rs. 5,995 crore) under RGGVY.
4. THREATS, RISKS AND CONCERNS
Our company has a significant concentration of outstanding
loans to State Electricity Boards and State Utilities and if
our loans to these borrowers become non-performing, the
quality of our asset portfolio may be adversely affected. Our
ability to borrow from various banks may be restricted by