Rec Reschedules Rs 340cr Gridco Loan

The public sector Rural Electrification Corporation (REC) has rescheduled loans amounting to Rs 340 crore each to two state government power undertakings. These are the Grid Corporation of Orissa (Gridco) and the Haryana Vidyut Prasar Nigam (HVPN).

REC is a public financial institution, for assisting state electricity boards (SEBs), state government departments and rural electric co-operatives to undertake village electrification and energise pumpsets.

Negotiations with Andhra Pradesh State Electricity Board (APSEB) and the Madhya Pradesh State Electricity Board are in an advanced stage which together owe REC about Rs 1300 crore to reschedule their loans. REC has also initiated discussions with the SEBs of Uttar Pradesh, West Bengal and Bihar to reschedule their loans.

These seven states have together defaulted to the tune of Rs 2500 crore to REC. Subsequently, REC had stopped funding these SEBs. "This exercise in rescheduling loans has been undertaken so that we can revive assistance to the boards.

These are the states which require assistance to a great extent," said REC chairman and managing director Divakar Dev.

Sources also point out that REC had little option but to reschedule the loans.

Although these loans are covered by state government guarantees, any attempt to enforce them would have led to a political outcry. As a part of the package, REC has put the escrow account mechanism in place. HVPN owes Rs 340 crore to the REC. It has already defaulted to the tune of Rs 75 crore. The balance Rs 265 crore consists of assorted loans which have to be repaid between one to nine years.

Under the new package worked out by REC, one third of the defaults amounting to Rs 25 crore has to be paid by December, 1998. The balance Rs 50 crore has to be paid over seven years.

The outstandings of Rs 265 crore have to be paid over the next seven years in monthly instalments. On repaying one third of the defaulting amounts, SEBs become eligible for fresh loans from REC.