Repayment of rural power loans on States

By Alok Mukherjee

NEW DELHI, JAN. 22. In a significant policy change, the Central Government has decided to make States responsible for repaying Central loans extended for rural electrification programmes.

So far, a portion of the normal Central assistance to States was earmarked for rural electrification under the Minimum Needs Programme and released by the Union Finance Ministry as a 100 per cent loan. This amount was then passed on to a Central organisation, the Rural Electrification Corporation, which in turn passed it to the State Electricity Boards. Since the REC was the recipient, it had the responsibility of recovering the loan from the SEBs.

The Central Government has now changed this procedure with effect from the Annual Plan 2000-2001, beginning on April 1. Henceforth, the loan for rural electrification would be released directly to the State Governments for on-lending to the SEBs. Consequently, the liability of the repayment would also be the responsibility of the State Governments.

However, the REC's role in supervising the rural electrification programmes would continue as in the past when SEBs prepared the village electrification schemes which in turn were scrutinised by the REC. Also, the REC would continue to monitor the programmes while the implementation would be done by the concerned SEB. The service charge to be paid by the SEB to the REC would be decided by the Planning Commission in consultation with the Ministry of Power and the REC.

The Government also made it clear that budgetary support to the REC for equity and loans would continue to be made available as was being done at present.

The significance of the change in policy to make States responsible for repaying loans is evident from the fact that the outstanding liability of the SEBs to the REC on account of rural electrification loans was Rs. 2,316.97 crores as on March 31, 1998. However, there was a record recovery of outstandings by the REC during 1998-99, with the result that the outstandings came down to Rs. 1,729.20 crores by March 31, 1999. It will now be the responsibility of the States to clear these dues.

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