PROPOSAL FOR MEETING FUNDS

REQUIREMENT FOR
DISTRIBUTED GENERATION
SCHEMES

Rural Electrification Corporation (REC)

27/08/2003
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 Target “Power for All”
• Village electrification by 2007
• Households electrification by 2012

 Rural Electrification Corporation Ltd. and

Power Finance Corporation mandated to
extend financial assistance for rural
electrification works

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 D.G. systems available

 Small Hydro
 Bio- mass
 Solar
 Diesel sets
 Wind Power

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D.G. Systems – Critical factors

 Some projects such as Bio mass

have only seasonal generation.
 Cost of SPV projects can be at times
10 times higher than the cost of
similar coal fired thermal generation
project.
 Maintenance costs in difficult areas
is generally very high.

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 Essential requirements - Funds
 Involvement required of Banks & Primarily Lending
Institutions (PLI) especially Gramin banks, SFCs & SIDCs
 Funds availability is absolutely essential at terms which
answers the peculiar needs of the sector, namely risk
factors, low cash flows in the initial years.
 REC offers solution to meet finances

by way of
Refinance assistance in addition to refinance being
provided by SIDBI & NABARD etc.

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REFINANCE POLICY-SIDBI

Ceiling Limit :
Schedule Banks, State Co-operative Banks –
Rs. 3.00 Cr.
Other Co-operative Banks Rs. .5 Cr.
RRBs Rs. .2 Cr.
SFCs Rs. 5 Cr.
Eligibility - All SSI Units
Interest Rate - 8.75% to 10.75%
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 Refinance Policy - IDBI

Limit
- 60 lacs to 240 lacs depending upon rating
of SFCs/SIDCs
Eligibility – Non SSI Units
- Debt Equity Ratio - 2: 1
- Promoter Contribution 25%
Period Upto 10 years

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 NABARD Scheme -
Eligible Institutions :
• Commercial Banks
• State Co-operative Banks, District Central Co-operative Banks,
Primary Agricultural Credit Societies
• State Co-operative Agriculture & Rural Development Banks, Primary
Co-operative Agriculture & Rural Development Banks
• Regional Rural Banks (RRBs)
• State Governments
• Non-Governmental Organisations (NGOs)

Rate of Interest : 8.5% for Refinance above 2.00 lacs.

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OBJECTIVES : REC POLICY

 Supplement financial resources

 Meet Government of India’s commitment to make
electricity available to all villages by 2007all
household by 2012.
 Encourage the setting up and expansion of micro
power projects/D.G. sets etc. for captive use by
Industrial Units and decentralized distribution in
different areas
 Making funds available to various SFCs/SIDCs,
Banks, RRB’s and other public financial
institutions
 Further on-lending for viable projects by PLI’s

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Type of Assistance
 REC would extend refinance for on-lending for
projects in the form of Term Loan
 for investment in power projects (captive as well as
other) irrespective of their end use i.e industrial,
agriculture, commercial & household etc.
 Electrification Projects (T&D) including
decentralized generation & distribution both in
rural as well as Urban Areas

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ELIGIBILITY CRITERIA FOR PLI

 Should not have defaulted to their existing

lenders.

 Application alongwith business plan, past

working results etc.

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 ELIGIBLE INSTITUTIONS
Institutions eligible to approach REC :-
 Scheduled Commercial Banks
 State Co-operative Banks/Urban Co-operative
Banks
 Other Co-operative Banks/ Regional Rural Banks
 State Financial Corporations
 State Industrial Development Corporations
 Other companies declared as Public Financial
Institutions as per Section 4(a) of the Companies Act.

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REPAYMENT PERIOD

 Maximum 10 years with moratorium period

of 2 years.

 Refinance to be repaid in 96 EMI’s after

moratorium period.

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INTEREST RATE BY PLI
 PLI’s subject to restrictions, imposition by
RBI from time to time, will be free to fix
their lending rates based on their risk
perception about individual borrower.

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APPRAISAL

 Normally the refinance will be based on

the appraisal done by the Primary Lending
Institution.

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DEBT EQUITY RATIO

 Not to exceed 3 :1
 The Central/State Govt. subsidies
whichever applicable are to be treated as
Equity for the purpose of calculating
D.E.R. However, they are not to be
treated as part of Promoters contribution
 Minimum Promoters Contribution 25% of
cost of Project.

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SECURITY
 Credit risk to be borne by the primary
lenders.

 Charge on Receivable on PLI by way of

Default Escrow.

 Any other mutually acceptable security

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DOCUMENTATION
 General agreement with the eligible
institutions/banks for refinance by REC
will be executed. Borrower has to enter
into an agreement with primary lender
and execute deed of hypothecation (as
per primary lender’s requirement)

 Tripartite Default Escrow Agreement

between REC PLI & Escrow Bank

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DISBURSEMENT
 Refinance to be released after completion
of documentation and on reimbursement
basis in one go or tranches as may be
required by PLI .
 The PLI to submit request on prescribed
form at our Project Office for processing.
 Disbursement from Corporate office /
Project office.

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THANK YOU

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