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Updated:20 Oct, 2020, 15:59 PM IST

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1.45 1.51%

Updated:20 Oct, 2020, 16:01 PM IST


Ladies and Gentlemen,

On behalf of the Board of Directors of Rural Electrification Corporation Limited (REC) and on my own behalf, I am pleased to welcome you on the occasion of the Forty Fourth Annual General Meeting of the Company.

I am privileged to head a "Navratna" Company having a consistent record of excellent all–round performance, growth and profitability over the last decade. From the formative years beginning in 1969 when the Company financed mainly pumpset Energisation and village electrification schemes, your Company has come a long way and today it is one of the leading public financial institutions in the country, funding almost all needs of entire Power Infrastructure space.

I take this opportunity to share my views on the economic scenario and to present the performance highlights of the Company.


The Global economy is still reeling under the effect of recession with marked slowdown in the Industrial activity. The European economy crisis combined with the turmoil in the oil producing Middle East countries has further precipitated the growth prospects and continue to remain uncertain. The green shoots of improvement in US economy have started and the efforts of ECB to mitigate the immediate pressures on the financial markets in the euro area have been made by injecting the liquidity. Still, the recovery in the euro zone has not shown sustained signals of economy stabilisation. As a result, fiscal concerns have been a matter of worry around the Globe. The coordinated efforts of respective governments and central banks across the nations in fiscal and monetary policy calling for vigilant financial discipline have shown the improvement in the state of world economy.

The Indian economy has not been spared either by the cascading effect of global turmoil with GDP growth slipping to sub six levels in the financial year 2012–13 after a run of good growth in the last few years. The long term fundamentals like rising incomes, increasing consumption base, favourable demographics and huge infrastructural growth coupled with Indian economy pattern of consumption nature continue to be broadly intact and expected to be sustained over medium to long term. The growth is primarily being driven by domestic investment and consumption with positive impact of rising rural economic activity. However, concerns like containing inflationary pressures on the back of rising food prices and commodities have been the top priority of the Government. Based on strong fundamentals and the mitigative measures taken by the Government of India, we expect Indian economy to sustain high growth rate over medium to long term overcoming the impact of such periodic volatility in the short term.


Power Sector forms one of the key constituents of Infrastructure and driver of economic activity and growth. Despite the visible signs of stagflation affecting the core sector growth, the performance of the Power Sector stood out during the fiscal 2013. A record 20,623 MW was added to the installed capacity in the financial year 2012–13 against a capacity addition target of 17,956 MW witnessing a growth of 15%. The majority addition came from thermal stream accounting for around 98% of the total capacity addition during the fiscal of which capacity addition from Private sector was 11188 MW. At the end of first year of XII Five Year Plan period, the total installed generation capacity stands at 223.34 GW which was 11.7% increase over that at the end of XI Plan. Renewable energy has seen an unprecedented growth towards the end of the XI Plan. The share of renewable energy is itself an indication of major shift imminent in the fuel mix for generation sources in the Country.

But for the major challenges faced by the Indian Power Sector currently viz. slippages of long term Coal linkages to the projects identified, failure to achieve planned targets from captive coal mine blocks, rising imported fuel prices, land acquisition, R & R, Environment and water related issues, shortage of qualified BOP suppliers and Delay in Financial Closure etc, the capacity addition would have been much higher.

The XII Five Year Plan targets for power envisage capacity addition of 88,425 MW. The overall funds requirement for the power sector for XII Five Year Plan period has been estimated at around Rs. 14 lakh crore. For the XIII Plan period, Planning Commission estimates that in order to meet the projected demand requirement by 2022 at a GDP growth rate of 9%, capacity addition of 94,000 MW would be required along with matching expansion required in transmission and distribution systems.

The Power generation has grossly suffered owing to shortage of Coal and failure to achieve planned targets from captive coal mine blocks. Shortage of coal is likely to the tune of 238 MT out of the total estimated coal requirement of 842 MT in the XII Plan. The share of coal based generation is planned to be around 80% of the projected capacity addition programme. To mitigate the coal problem, use of state of the art technology for mining with competent manpower, improved coal benefication techniques, R&R policy for coal mining companies, task force creation for ironing out problems relating to land acquisition, forest clearance, progress monitoring of coal mining projects and fixing new linkages for higher efficiency projects are being looked into by GoI. These bottlenecks have resulted in slipping planned capacity addition targets and increased dependence of generating companies on imported coal having a cascading effect on production cost of electricity.

Distribution Sector, the revenue generating link in the Generation – Transmission–Distribution chain is clearly the weakest link in the power sector value chain and is threatening to derail the entire process of power sector reforms as also jeopardize the India's growth story. While the power generation sector in the Country is struggling to meet burgeoning demand, the Distribution Sector has been reeling under losses and has been in focus with various measures being taken by the Govt. of India to make the State DISCOMs/Utilities viable.

Though most of the SEBs have been unbundled, distribution is still largely under the control of Government Utilities. Post unbundling, their operations on sound commercial principles under the regulatory supervision has not yielded the desired results. Worsening financial condition of power distribution utilities owing to high Aggregate Technical & Commercial (AT&C) losses, inability to revise tariffs strictly in principle and spirit despite respective ERCs directive for revision in most of the states since long, increasing Subsidy burden, cross subsidization by the industry to domestic consumer and farmers, billing inefficiencies and more importantly need to buy expensive power to tide over short–term deficits are eating away the benefits of the policy initiatives. The combined annual losses of all SEBs add up to about Rs. 1.9 lakh crore.

To turnaround State DISCOMs and ensure their long term viability, a financial restructuring scheme for the State owned DISCOMs viz Transitional Finance Mechanism (TFM) has been formulated by the Government of India. The mechanism includes measures such as approval of Financial restructuring plan (FRP) from State Govt. and the respective State Electricity Regulatory Commission (SERC), revision of tariff, thereby reducing the gap between Average revenue Realised (ARR) and Average Cost of Supply (ACS), release of subsidies only to State Govt. to be later adjusted in the ARR, posting of Audited Accounts on regular basis, incentivisation through technology interventions in R–APDRP and NEF, devising utility wise turnaround plan and monitoring its implementation at the highest level.

Further, Ministry of Power has developed an integrated rating methodology covering the State Power Distribution Utilities with the objective to rate all utilities based on their performance and ability to sustain commercially viable operations in the long run. The focus is on ranking and incentivizing/dis–incentivising the entities for stimulating and improving their operational & financial performance. This is expected to facilitate Banks/FIs adopt a uniform and realistic assessment of the risks associated with funding needs of different Utilities and enable funding with appropriate loan covenants for stimulating and enhancing operational, financial and managerial performance.

For the XII Five Year Plan, the Planning Commission estimates investment of Rs. 3.14 lakh crore for the sector inclusive of Restructured Accelerated Power Development and Reforms Programme (R–APDRP) and Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) schemes. The focus of the R–APDRP is on actual, demonstrable performance in terms of sustained loss reduction, establishment of reliable and automated systems for sustained collection of accurate base line data and the adoption of Information Technology in the areas of energy accounting. RGGVY Scheme seeks Rural Electricity Infrastructure and Household Electrification for providing access to electricity to all rural households. Under the scheme, 90% capital subsidy is being provided by Government of India for overall cost of the projects. REC is the Nodal Agency for overseeing the implementation of the Programme. The performance orientation built into the R–APDRP and NEF is expected to attract and accelerate investments in distribution infrastructure, thus resulting in faster accomplishment of loss reduction goals.

The power sector is thus poised to remain vibrant and attract significant investments in the future.


Your Company continued to register higher growth and record performance for the financial year 2012–13, in key areas of Disbursements of Loans, Recoveries, Operating Income and Profits. A total sum of Rs. 40,183 crore (including TFL component of Rs. 9,570 crore and subsidy of Rs. 907.89 crore under RGGVY) was disbursed during the financial year 2012–13 as against Rs. 30,593.30 crore in the previous year. Your Company's Non–performing Assets (NPAs) continued to be at low levels. The total Operating Income of your Company for the financial year 2012–13 increased by 30% to Rs. 13,518.86 crore from Rs. 10,423.75 crore during the previous year. The profit after tax increased to Rs. 3,817.62 crore, up by 36%, from Rs. 2,817.03 crore for the previous year. 

Your Company enjoys international credit rating from International Credit Rating Agencies Moody's and Fitch and the same are "Baa3" and "BBB–" respectively equivalent to sovereign rating of India. "Baa3" rated obligations denote moderate credit risk and "BBB–" rated obligations denote that expectations of default risk are currently low. Further, during the financial year 2012–13 also, your Company continued to get the highest rating AAA from domestic rating agencies like CRISIL, CARE, India Ratings & Research and ICRA for its specific Resource Mobilization programme. Consistent high ratings bear testimony to REC's stature as an institution with strong fundamentals and inherent financial strength.

Your Company mobilized Rs. 30759.16 crore from the market during the financial year 2012–13 for its operational requirements. This includes Rs. 4903.25 crore raised by way of Capital Gains Tax Exemption Secured Redeemable Non–convertible Taxable Bonds, under Section 54EC of the Income Tax Act, 1961, Rs. 2648.41 crore raised by way of Tax Free Secured Redeemable Non–convertible Bond u/s 10(15)(iv)(h) of the Income Tax Act, 1961, out of which Rs. 500 crore raised through private placement and remaining raised through public issue in two tranches in line with terms of notification, Rs. 2117.18 crore through Commercial Paper (CP), Rs. 16378.90 crore through issue of Institutional Bonds, Rs. 4464.40 crore by way of External Commercial Borrowings and Rs. 247.02 crore by way of Official Development Assistance (ODA) loan from Kfw, Germany and Japan International Cooperation Agency (JICA), Japan. 


In addition to interim dividend of Rs. 6.75 per share paid in February, 2013, Directors of your Company have recommended a final dividend of Rs. 1.50 per share for the financial year 2012–13, which is subject to your approval. The total dividend for the financial year 2012–13 will work out to Rs. 8.25 per share of Rs. 10/– representing 82.50% of the paid up capital of the Company and 21.34% of Profit After Tax, against 75% of the paid up capital of the Company and 26.29% of Profit After Tax paid in the previous year. The total dividend pay–out for the financial year will amount to Rs. 814.65 crore (excluding dividend tax).


The Company has been funding power generation, transmission and distribution projects besides electrification of villages and pumpset energisation. It continued to play an active role in creating new infrastructure and improving the existing ones under the transmission and distribution network in the country. In line with the country's objective of Bharat Nirman to provide "Power for all" and also reduce the AT&C losses, the Company has been laying special thrust in expansion and strengthening of existing transmission network and more importantly modernising of the distribution system by financing investment in transformers, meters, capacitors etc. and for conversion of Low Voltage Distribution to High Voltage Distribution System (HVDS).


During the financial year 2012–13, your Company sanctioned 41 nos. of generation / R&M loans including 13 no. of additional loan assistance with total financial outlay of Rs. 26,854.79 crore including consortium financing with other financial institutions and has disbursed Rs. 12,496.87 crore against the ongoing generation projects.


Your Company continued to play an active role in creating new infrastructure and improving the existing ones under the transmission and distribution network in the country. In line with the national objective of providing power for all by the year 2012 and also reduce the AT&C losses, your Company has been financing schemes for expansion and strengthening of the transmission network and more importantly, modernising of the distribution system. During the financial year 2012–13, the company sanctioned a total sum of Rs. 47,845.64 crore and disbursed a total sum of Rs. 22,287.16 crore for transmission and distribution projects.


During the financial year 2012–13, besides financing to Generation and T&D projects, your Company has also sanctioned loan assistance of Rs. 580.06 crore for 11 grid–connected Renewable Energy projects with installed generation capacity aggregating 126.60 MW and sanctioned Short Term Loan (STL) of Rs. 4190 crore to various state power utilities.


The Government of India is according topmost priority to rural electrification to realise the objectives of "Power to all villages" and 'Power for all" through its flagship programme Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). Under the scheme, 90% capital subsidy is being provided by Govt. of India for overall cost of the projects. Under this RGGVY programme, cumulatively up to 31.03.2013, works in 107083 un–electrified villages have been completed and connections to 2.07 crore BPL households have been released. During the financial year 2012–13, the Company disbursed a total sum of Rs. 980.03 crore (including Government Subsidy of Rs. 907.89 crore). 


To focus on additional business of consultancy in the areas of distribution, transmission etc. following wholly owned subsidiaries have been incorporated by your Company as on date:

(i) REC Power Distribution Company Limited (RECPDCL)

(ii) REC Transmission Projects Company Limited (RECTPCL)

Further, REC Transmission Projects Company Limited (RECTPCL) is designated by the Ministry of Power, Government of India as "Bid Process Coordinator" for different independent transmission projects. As on date the following Project Specific Special Purpose Vehicles (SPVs) have been incorporated as Subsidiary Companies:

(i) Vizag Transmission Limited (VTL)

(ii) Kudgi Transmission Limited (KTL)

(iii) Nellore Transmission Limited (NTL)

(iv) Unchahar Transmission Limited (UTL)

(v) Baira Siul Sarna Transmission Limited (BSSTL)

(vi) NRSS XXIX Transmission Limited*

(vii) NRSS XXXI (A) Transmission Limited*

(viii) NRSS XXXI (B) Transmission Limited* incorporated after 31st March, 2013.

For each of the transmission system, a two stage Bidding process featuring separate Request for Qualification (RFQ) and Request for Proposal (RFP) has been initiated in accordance with tariff based competitive bidding guidelines of Ministry of Power, GoI for selection of developer as Transmission Service Provider. The bidding process for selection of developer for respective transmission projects is expected to conclude within the financial year 2013–14.

Further, during the financial year 2012–13, RECTPCL concluded the process of selection of developer for Transmission System associated with IPPs of Vemagiri Area: Package–A project specific SPV namely Vemagiri Transmission System Limited was transferred to M/s Power Grid Corporation of India Limited, who had emerged as the successful bidder on 18th April, 2012 on payment of acquisition price amounting to Rs. 182.79 million which includes professional fee of Rs. 150 million.

Further, your Company along with three other PSUs namely NTPC, PGCIL and PFC as equal partners, had formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL) on December 10, 2009. The business plan of EESL envisages taking up projects in Energy Conservation Building Codes, Agriculture Demand Side Management, Municipal DSM, Bachat Lamp Yojana, promoting usage of energy efficient appliances and concept of Energy Service Companies (ESCOs) etc, besides taking over the current commercial roles being discharged by the Bureau of Energy Efficiency (BEE).


The Company had established a National Institute in Hyderabad 32 years ago, called Central Institute for Rural Electrification (CIRE), to cater to the training and development needs of engineers and managers of Power and Energy Sector and other organisations concerned with Power and Energy. CIRE conducts regular programmes on various aspects of Transmission and Distribution for national and international Power Sector Executives, as well as in–house training programmes for the Company's employees. In keeping with the needs of the 21st century, we plan to further modernise the CIRE, along with establishment of an 'Energy Park' in its premises to give a practical orientation to the training.


Training and HRD continued to receive a place of priority as a means of equipping employees with aim of sharpening business skills and competence required for better employee performance and provides all possible opportunities and support to the employees to improve their performance and productivity. Based on the assessed needs and as means to satisfy them, the Company sponsors its officers and staff to various training programmes, workshops etc. within the country and abroad. In addition, training programmes are conducted in–house including CIRE training institute owned by REC.


Your Company has been making continuous efforts at upgrading and implementing state–of–the–art IT enabled and IT based systems for improving internal systems and processes. Your Company has already implemented an integrated Oracle based ERP system covering all major business functions. It covers all important business functions of the Company like Central accounting, project appraisal and sanctions, Disbursement and Management of loan accounts, Cash Management, Treasury functions, payroll, purchases etc. In addition to that your Company has already implemented a number of other systems also including Document Management System, e–procurement system, Intranet etc. for greater transparency and better e–governance. Further during the financial year 2012–13, your Company has established Disaster Recovery Centre for ERP operation, a Work–Flow Management system for electronic movement of decision making in selected divisions and offices. All these have led to improvement of internal efficiency and greater customer satisfaction. Your Company has also initiated implementation of HR–ERP system for transformation of HR practices from stand–alone HR system to an integrated HR system.


As a listed Public Sector Enterprise, your Company has been complying with the requirements of Corporate Governance as stipulated in the Listing Agreements and also the provisions of Guidelines notified by the Department of Public Enterprises (DPE), Government of India in this regard. Corporate Governance at Rural Electrification Corporation Limited (REC), is managing the business in an ethical and responsible manner for sustainable value creation of various stakeholders within the prevalent regulatory framework. The Company believes in adopting the best practices that are followed in the area of Corporate Governance across the globe.

Further, as a responsible Corporate Citizen, your Company has actively supported the implementation of 'Green Initiative' circulars issued by Ministry of Corporate Affairs (MCA) and effected electronic delivery of Annual Report and intimation of Final/ Interim Dividend was sent electronically to those shareholders whose email ids were registered.


During the financial year 2012–13, the Corporate Social Responsibility (CSR) initiatives were pursued with a view to integrate REC's business operations with social processes while recognizing the interests of all stakeholders. CSR projects were linked with the principle of sustainable development. The strategic focus was aimed at CSR initiative towards fulfilling the National Plan goals and objectives including Millennium Development Goals ensuring the gender sensitivity, skill enhancement, entrepreneurship and employment generation by co–creating value with local institutions/people. While identifying CSR initiatives the Company has adopted an integrated approach to address the community, societal and environmental concerns measured in terms of triple bottom line approach. CSR strategy has been developed with action plan in project–based accountability approach. Most of the CSR activities have been implemented in project–mode with baseline survey and specified time–frame and identified milestones and periodic monitoring. Disbursement of allocated funds under CSR was linked with achievement of the milestones and deliverables.

During the financial year 2012–13, @0.5% of Profit After Tax (PAT) of previous year was allocated towards CSR Budget. During the year, many CSR initiatives were undertaken inter–alia "Skill development/up–gradation and job–oriented training leading to creation of livelihood opportunities" to 1000 rural/semi urban youth from SC/ST/OBC/ economically weaker section of society including women from backward areas of UP, Bihar, Jharkhand, Chhattisgarh and Madhya Pradesh states, providing 4 Nos. customized vehicles for providing cooked food to Government Schools in Rajasthan State, setting up of 42 libraries in the government schools of Uttarakhand, Delhi and Chhattisgarh States, supporting solar lighting service to 30 villages each in Assam and Odisha States, and Distributed Aids and Appliances to persons with disabilities in UP, MP, AP, Tamil Nadu, Maharashtra and Assam States, etc.


The performance of your Company in terms of MoU signed with the Government of India in the Ministry of Power for the financial year 2011–12 has been rated as "Excellent". This is the 19th year in succession that REC has received "Excellent" rating since the year 1993–94 when the first MoU was signed with the Government. For the financial year 2012–13 also, the performance of the Company is poised to receive "Excellent" rating.

It is a matter of great honour to your Company that it was awarded IPE–CSR award for Corporate Governance from Institute of Public Enterprises (IPE), Hyderabad for the financial year 2012–13. Your Company has also received Award in the category of "Non Banking Financial Services" by India Pride Awards, Dainik Bhaskar & DNA, DSIJ PSU Award 2012 for 'Fastest Growing Operational Matrix' and 5th CIDC Vishwakarma Award, 2013.


Your Company has adopted the "Whistle Blower Policy" which is in terms of non mandatory requirement of Clause 49 of the Listing Agreement and Clause 8 of Guidelines on Corporate Governance for CPSEs issued by DPE in order to enable Employees, Directors, Auditors etc. to disclose information which the individual believes to be alleged malpractice or wrongdoing affecting the business or reputation of the Company, as a major move towards achieving better Corporate Governance Practices.

Another important initiative was voluntarily getting the Secretarial Audit conducted by Practising Company Secretary for the financial year 2012–13, as done in previous years and they have issued un–qualified Secretarial Audit Report. 

Your Company has also adopted the "Sustainable Development" policy issued by the DPE, which is applicable from the current financial year. Sustainable Development involves an enduring and balanced approach to economic activity, social progress and environmental responsibility and a budget of approximately Rs. 3.23 crore has been allocated for the same. To begin with, broadly five projects have been identified to be implemented in the campus of Central Institute of Rural Electrification, Hyderabad, which include energy audit, installation of solar lighting, solar/wind hybrid power plant, greenery and tree plantation and rain water harvesting measures.


Your Company offers a wide range of products to target customer segments to satisfy their specific financial needs. REC will strive to strengthen its core financing activities and explore new business areas in the allied fields also viz Power equipment financing, energy efficiency related activities, equity financing etc.

Your Company is planning to enhance its presence in the Green Energy financing, such as Solar, Biomass and Wind Power, which shall help in mitigating the problem of power scarcity, carbon emissions and fuel supply. Further, your Company constantly reviews and revises its lending and operational policies/ procedures to suitably align with market requirements as also with its corporate objectives.

Your Company has formed a "Strategic Business Group" comprising of senior officers to explore new business opportunities and look for the new products with regard to the business development of the Company.

Your Company is committed to accelerate growth and will continue to achieve the best standards of Corporate Governance with emphasis on authority and freedom of management coupled with transparency, accountability and professionalism in their working with the aim of enhancing long term economic value of all the stakeholders and society at large.


In the backdrop of XI Five Year Plan's achievements, the achievement made during the first year of XII Plan in power infrastructure and the amount estimated for funding the growth during the XII Five Year Plan period by Planning Commission for addition of 88,425 MW generation capacity together with matching transmission and distribution infrastructure, the power sector will continue to provide one of the biggest avenues to make significant contribution towards the development of Country's infrastructure. The Asset size of the Company in the financial year 2012–13 stands at Rs. 1.30 Lakh crore. Your Company, on its part, will make all efforts and harness all resources to capture optimal share of funding business of the estimated debt requirement of Rs. 9–10 lakh crore for XII Five Year Plan. The Company shall strive to sustain and maintain consistent growth rate and surge ahead to attain still greater heights of performance, to match the expectations of all its stakeholders.


I take this opportunity to express my sincere gratitude for the immense support and guidance received by your Company from the Hon'ble Minister for Power/ Hon'ble Minister of State for Power (Independent Charge), the Secretary (Power), the Additional Secretary (Power), the Joint Secretary (Rural Electrification) and other officers in the Ministry of Power. I am also grateful to the officers in the Ministry of Finance, Planning Commission and the Reserve Bank of India, the Comptroller & Auditor General of India, the Joint Statutory Auditors of the Company, and the Secretarial Auditors for all their support and guidance extended in ensuring smooth and successful operations of the Company. I also express my gratitude to our lenders and investors for having reposed their trust in us.

I would also like to express my thanks and appreciation to my esteemed colleagues on the Board and to all employees of REC for their unswerving commitment to their work. I convey my special thanks to all the other stakeholders of the Company for their valuable support and cooperation and reposing continued confidence in the Company's performance.

I am confident that with a dedicated and committed resource of employees and valuable support of our esteemed shareholders, your Company will continue to deliver its responsibilities and enhance value to its stakeholders.

With best wishes, 

(Rajeev Sharma)

Chairman & Managing Director

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