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REC may miss target of 78 million homes

REC may miss target of 78 million homes

Mumbai: Rural Electrification Corp. Ltd (REC), which announced its plans on Thursday to make an initial sale of 156 million shares to raise around Rs1,600 crore, says it will likely miss the target set for it by the government which entails covering 78.09 million households and 18% of the country’s inhabited area.

That means the company, the agency for implementing the government’s programmes related to providing power to all, will have to ensure that more than 100,000 villages and their surrounding hamlets, and 20 million poor (below the poverty line) households get access to electricity.

“We may not meet the target of electrifying 100% of the households, but we will certainly meet 80% of the target. The detailed project reports have already been drawn up and we will begin loan disbursal soon," said REC chairman and managing director Anil Kumar Lakhina.

REC disburses loans to state electricity utilities that implement the rural reach projects. Under a new scheme approved by the government on 5 February, REC will disburse loans to the tune of Rs28,000 crore from April. Most of the money from the share sale, which will bring the government’s stake in the firm to 81.2%, will go towards meeting REC’s need for capital.

State utilities have thus far submitted project reports for supplying electricity to 534 districts across the country and these are now being evaluated, said Devendra Singh, joint secretary in charge of rural electrification at the ministry of power.

All villages in Himachal Pradesh, Goa, Punjab, Haryana, Sikkim, Jammu and Kashmir have been electrified, but these states collectively account for only about 6% of India’s households. According to Prashant Dugar, a power sector analyst at Infraline Energy, an energy consulting firm, the government (and by extension REC and the state utilities) has managed to electrify only around 10,000 villages until now. “Suddenly, achieving targets of 50,000 villages will be difficult for the state utilities."

Industry analysts are sceptical about the success of the programme. “It is an ambitious target... We have a shortage of distribution transformers. We also need to change people’s attitude towards paying for power they use in the rural areas," said Anjani Agarwal, head energy practice at audit and consulting firm Ernst and Young.

While Singh says equipment isn’t a bottleneck, the bigger challenge, according to Lakhina, is ensuring that “state utilities use the loan for laying new lines and not refurbishing their existing ones." The addition of new consumers to the national grid is expected to increase the demand for power by 13,000 MW. This has been factored into the 78,000MW capacity addition planned in the five years to 2012.

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