REC ran up Rs 153.36 cr loss on concessional interest: CAG

Government auditor CAG today said state-owned utility Rural Electrification Corporation (REC) has suffered a loss of Rs 153.36 crore as it did not claim reimbursement of differential interest on soft loans.
"REC Limited suffered loss of Rs 153.36 crore up to December 2014 as it did not approach the Ministry of Power to reimburse the differential interest on soft loans it had extended under Rajiv Gandhi Grameen Vidutikaran Yojana (RGGVY)," said a CAG Compliance Audit Observations report tabled in the Lok Sabha today.
The Power Ministry notified RGGVY in March 2005 and appointed REC the nodal agency for implementation of the scheme. There was no specific condition stipulated for providing soft loans under RGGVY.

A brochure issued by the Ministry said the government will provide capital subsidy and REC the remaining amount as loan assistance on soft terms.
The CAG observed that REC on the basis of the above brochure at its board of directors (BoD) meeting (on August 30, 2005) decided on its own to provide loans to states at 5 per cent interest as against the then prevailing 8 per cent.
No cost-and-impact analysis was carried out by REC while deciding to charge concessional rate of interest under RGGVY, it noted.
"Till December 2014, REC had suffered a loss of Rs 153.36 crore on account of charging interest at the rates less than the rates applicable to normal rates applicable on similar REC loans from time to time. REC being a separate listed commercial entity should have taken up the issue of reimbursement of differential interest cost on soft loans under RGGVY with the Power Ministry," it said.

The CAG also said the loss of interest will continue to increase further till repayment of outstanding balances of RGGVY loan and further disbursement/repayment of soft loans, if any.