With a net worth of over $1 billion US, the Rural Electrification Corporation Limited is by far the most influential organization involved in rural electrification in India. The Rural Electrification Corporation Limited (REC) was incorporated in 1969 under the companies Act of 1957 as a Government of India Public Sector Enterprise. As a state-owned corporation, it provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric cooperatives for rural electrification projects. Their stated mission and vision is “to facilitate availability of electricity for accelerated growth and for enrichment of quality of life of rural and semi-urban population.” Their efforts should be judged in terms of how they meet their mission of increasing electricity access, but as their mission does not mention a dedication to improving the quality and regularity of electricity provided, they cannot be judged on that metric.
While the REC is a part of the Indian central government, they realize the value and need for competition to provide rural electrification and that the multifaceted nature of the problem. Thus their second goal is “to act as a competitive, client-friendly and development-oriented organization for financing and promoting projects covering power generation, power conservation, power transmission and power distribution network in the country.” REC seeks to accomplish its goals through providing loans to government entities and corporations so they may realize rural electrification projects.
From its central office in New Delhi, REC disburses its funds for loan assistance for rural electrification schemes that gets distributed through their various field units. The field units, known as Project Offices coordinate the programs that have received funding with the State Electricity Boards or State Power Utilities as well as assist them in designing rural electrification projects and then disburse the funds and oversee the implementation of the projects.
As REC has grown and matured, its focus has stayed the same but its actions have changed. Until May 2002, REC only financed micro generation projects, projects up to 25 MW capacity, but in June 2002 their mandate was expanded to include financing of all generation projects without limit on size or location, as long as they still served rural and semi-urban populations. REC is organized so as to not pick technology winners or particular pet projects, but rather evaluate and approve funding for select, high quality projects proposals that they receive from various state institutions. Because of this, REC finances all types of power generating projects, whether renewable energy based or non although they do have a separate division the focuses on loans for small hydro, biomass, wind energy, solar and co-generation power projects.
While REC has done an admirable job increasing rural electrification in India, it can be improved. As a major corporation, REC is expected to approve loans only for the rural electrification projects with the highest payback and possibility of success. This has enabled REC to grow substantially and continue to provide loans for worthy projects, but this has resulted in a lack of attention paid to suboptimal projects. This is an issue as these suboptimal projects are generally in the states that have the greatest need and are furthest behind. Of the 14 major projects that have been approved in the state sector only one has occurred in one of the five states detailed earlier (REC Generation).
This results in the middle of the pack of Indian states progressing and becoming more appealing places to start new rural electrification projects while the states that lag behind fall further behind as they are not profitable enough areas to merit investment. This is especially the case in Bihar as it is the most corrupt state in India which makes the cost of doing business their unappealing for organizations like REC. This cannot be solved by simply approving more loans to projects in these five states as their applications are generally being denied due to their poor planning and profitability. REC must still be profitable so it can continue to do its work, but it also needs to expand service to the least developed regions.
REC needs to create a new division dedicated solely to states of Assam, Bihar, Jharkand, Orissa and Uttar Pradesh. This division should expand its mandate so as to include providing assistance in crafting these loan proposals, take a larger role in designing the electrification projects and provide significant levels of supervision for these projects in order to ensure they get implemented with a minimum of delay and waste from corruption and poor management. This new division will most likely be less profitable than the rest of REC, but lower profit margins are acceptable if these five states that have fallen behind catch up and are no longer the basketcases of India in terms of rural electrification
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