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Directors Report of Rural Electrification Corporation Ltd.

Mar 31, 2016

The Directors have pleasure in presenting the Forty Seventh Annual Report together with the Audited Financial Statements of your Company for the financial year ended March 31, 2016.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the financial year 2015-16 were as under with comparative position of previous year''s performance:-

(Rs. in crore)

Parameter FY 2015-16 FY 2014-15

Loans Sanctioned (excluding sanctions under DDUGJY-RE and DDG) 65,471.10 61,421.37

Disbursements (including subsidy under DDUGJY-RE and DDG) 50,630.81 46,446.82

Recoveries (including interest) 47,921.00 32,005.56

Total Operating Income 23,638.35 20,229.53

Profit Before Tax 8,045.21 7,427.04

Profit After Tax 5,627.66 5,259.87

1.2 Financial Performance

The total operating income of your Company for the financial year 2015-16 has increased by 17% to Rs. 23,638.35 crore from Rs. 20,229.53 crore during the previous year. The Profit after tax increased by 7% to Rs. 5,627.66 crore from Rs. 5,259.87 crore for the previous year.

Loan asset book of your Company as on March 31, 2016 has increased by a healthy 12% to reach a historic high of Rs. 2,01,278 crore from Rs. 1,79,647 crore in the previous year. The outstanding borrowings as on March 31, 2016 were Rs. 1,69,106 crore.

Earnings Per Share (EPS) for the financial year ended March 31, 2016 is Rs. 56.99 per share of Rs. 10/- each. Net Worth of the Company as on March 31, 2016 has increased by 15% to Rs. 28,618 crore from Rs. 24,857 crore in the previous year.

1.3 Dividend

In addition to interim dividend of Rs. 12.00 per share paid in February, 2016, the Board of Directors of your Company have recommended a final dividend of Rs. 5.10 per share for the financial year 2015-16, which is subject to approval of the Shareholders in the ensuing Annual General Meeting. The total dividend for the financial year 2015-16 will work out to Rs. 17.10 per share, representing 171% of the paid-up share capital of the Company as against Rs. 10.70 per share, representing 107% of the paid-up share capital of the Company in the previous year. The total dividend pay-out for the financial year 2015-16 will amount to Rs. 1,688.55 crore (excluding dividend distribution tax of Rs. 341.71 crore).

1.4 Share Capital

The issued and paid up share capital of the Company as on March 31, 2016 was Rs. 987.46 crore divided into 98,74,59,000 equity shares of Rs. 10/- each against the Authorized Share Capital of Rs. 1,200 crore divided into 120,00,00,000 equity shares of Rs. 10/- each.

The President of India held 65.64% of the paid up equity share capital of the Company as on March 31, 2015. During the financial year 2015-16, the President of India acting through Ministry of Power, Government of India disinvested/sold 4,93,72,950 equity shares i.e. 5% of total paid up capital of the Company through Offer For Sale (OFS) on April 8, 2015 and further divested/sold 27,588 equity shares i.e. 0.003% of total paid up capital of the Company through an off-market transaction under Central Public Sector Enterprises Exchange Traded Fund (CPSE ETF) on April 10, 2015. Accordingly, as on March 31, 2016, the President of India held 60.64% of the paid up equity share capital of the Company.

2. LOANS SANCTIONED

The Company sanctioned loans worth Rs. 65,471.10 crore during the financial year 2015-16, as against Rs. 61,421.37 crore in the previous year, excluding sanctions under Deendayal Upadhyay Gram Jyoti Yojana- RE Component (DDUGJY-RE) and Decentralised Distributed Generation (DDG). The state-wise and category-wise break-up of loans sanctioned during the financial year are given in enclosed Table-1 and Table-2 respectively. The cumulative amount of sanctions made since inception up to March 31, 2016 was Rs. 6,81,479.23 crore, including DDUGJY-RE and DDG project cost (capital subsidy and loan) upto XI five year plan. The cumulative state-wise position of sanctions up to the financial year 2015-16 is given in enclosed Table-3.

3. DISBURSEMENTS

A total sum of Rs. 46,025.83 crore was disbursed during the financial year 2015-16 as againstRs. 42,818.46 crore in the previous year. Further, an amount of Rs. 5,023.99 crore (subsidy of Rs. 4,541.44 crore under RE component of DDUGJY and subsidy of Rs. 63.54 crore under DDG and loan component of Rs. 419.01 crore) under DDUGJY, has been disbursed. The cumulative amount disbursed since inception up to March 31, 2016 was Rs. 3,29,538.39 crore excluding subsidy under DDUGJY-RE and DDG. The state-wise disbursements and repayment of loan by borrowers during the financial year 2015-16 together with cumulative figures and outstanding as on March 31, 2016 are given in enclosed Table-4.

4. RECOVERIES

4.1 The Company gives utmost priority to the timely realization of its dues towards principal, interest, etc. The amount due for recovery including interest for performing assets during the financial year 2015-16 was Rs. 48,278 crore as compared to Rs. 32,661 crore during the previous year. The Company recovered a total sum of Rs. 46,641 crore towards performing assets during the financial year 2015-16 as againstRs. 31,412 crore during the previous year. The Company achieved recovery rate of 96.61% for the financial year 2015-16.The overdues from defaulting borrowers pertaining to Performing Assets as on March 31, 2016 was Rs. 1,637 crore. Further, an amount of Rs. 1,280 crore was recovered during the financial year 2015-16 towards earlier year dues and NPAs as againstRs. 593.56 crore during the previous year.

4.2 Your Company''s Non-Performing Assets (NPAs) continue to be at low levels. As on March 31, 2016, the Gross NPAs of the Company was Rs. 4,243.57 crore {including loans classifi ed as NPAs due to restructuring/ non-achievement of DCCO amounting to Rs. 811.33 crore}. The percentage of NPA as a percentage of Gross Loan Assets stood at 2.11% as on March 31, 2016 as compared to 0.74% as on March 31, 2015. The net NPA as on March 31, 2016 was Rs. 3,230.30 crore, which is 1.60% of Gross Loan Assets. Further, no doubtful loans have been rescheduled by the Company, during the financial year 2015-16.

The details of loans rescheduled during the financial year 2015-16 and their position as on March 31, 2016, are as under:

(Rs. in crore)

Particulars FY 2015-16 FY 2014-15

No. of Borrowers 23 27

Standard Loans* Amount Outstanding 22,829.88 35,024.03

No. of Borrowers 3 0

Sub-Standard Loans* Amount Outstanding 1,402.44 0

No. of Borrowers 26 27

Total Amount Outstanding 24,232.32 35,024.03

* The Rescheduled loan amount includes Rs. 5,649.12 crore wherein the first repayment date was extended due to delayed commissioning of the respective project.

5. FINANCIAL REVIEW

5.1 Summary of Financial Results

The summary of audited financial results of the Company for the financial year ended March 31, 2016 is as under:

(Rs. in crore)

Particulars Standalone Consolidated

FY 2015-16 FY 2014-15 FY 2015-16 FY 2014-15

Revenue from Operations 23,638.35 20,229.53 24,012.88 20,384.34

Other Income 117.93 158.52 117.05 165.55

Total Income 23,756.28 20,388.05 24,129.93 20,549.89

Finance Costs 14,283.12 11,844.61 14,282.35 11,839.59

Other Operating Expenses 338.10 313.44 604.74 351.78

Provisions and Contingencies 1,089.85 802.96 1,096.18 806.18

Total Expenses 15,711.07 12,961.01 15,983.27 12,997.55

Profit Before Tax 8,045.21 7,427.04 8,146.66 7,552.34

Provision for Taxation 2,417.55 2,167.17 2,455.24 2,207.92

Profit After Tax 5,627.66 5,259.87 5,691.42 5,344.42

Less : Appropriations

Transfer to Special Reserve u/s 36(1)(viii) of the Income Tax Act, 1961 1,900.00 1,629.00 1,900.00 1,629.00

Transfer to Reserve for Bad & Doubtful Debts u/s 36(1)(viia) of the 390.00 353.00 390.00 353.00 Income Tax Act, 1961

Dividend 1,688.55 1,056.58 1,688.55 1,056.58

Dividend Distribution Tax 341.71 212.17 345.68 214.21

Transfer to Debenture Redemption Reserve 196.59 185.79 196.59 185.79

Transfer to General Reserve 570.00 526.00 572.89 530.76

Surplus carried over to Balance Sheet 540.81 1,297.33 597.71 1,375.08

5.1.1 Contribution to National Exchequer

During the financial year 2015-16, the Company contributed an amount of Rs. 3,749.55 crore as compared to Rs. 3,134.24 crore in the previous year to National Exchequer in the form of payment of Dividend to the Government of India against its shareholding in the Company, Dividend Distribution Tax, Direct Taxes and Service Tax paid including CENVAT credit, as detailed below:

(Rs. in crore)

Particulars FY 2015-16 FY 2014-15

Dividend paid to the Government of India 880.19 631.96

Dividend Distribution Tax 293.47 187.26

Direct Taxes 2,540.96 2,285.04

Service Tax paid including CENVAT credit 34.93 29.98

Total 3,749.55 3,134.24

5.1.2 Ratio Analysis

A comparative statement of important ratios of the Company for the financial year 2015-16 vis-à-vis 2014-15 is as below:

Particulars FY 2015-16 FY 2014-15

Earnings Per Share (Rs.) 56.99 53.27

Return on Average Net Worth (%) 21.05 23.11

Book Value per Share (Rs.) 289.81 251.73

Debt Equity Ratio (times) 5.91 6.08

Price Earnings Ratio (times)* 2.92 6.25

Interest Coverage Ratio (times) 1.56 1.63

*PE Ratio has been calculated on the basis of Closing Price of equity share of REC at NSE as on March 31, 2016 & March 31, 2015.

5.2 Resource Mobilization

The Company mobilizedRs. 31,254.92 crore from the market during the year 2015-16. This includesRs. 1,000 crore by way of Tax Free Secured Redeemable Non-Convertible Bonds, Rs. 6,476.70 crore by way of Capital Gain Tax Exemption Bonds,Rs. 15,526 crore by way of non-priority sector bonds,Rs. 8,046.60 crore (i.e USD 1,220 million) from External Commercial Borrowings (ECB) and Rs. 205.62 crore by way of Official Development Assistance (ODA) loan from Kreditanstat fur Wiederaufbau (KfW), Germany & Japan International Cooperation Agency (JICA), Japan. Further, an amount of Rs. 20,771.78 crore was also raised through Commercial Paper (CP).

Cash Credit Facilities

The Company has an approved cash credit/WCDL limit of Rs. 6,510 crore for availment from various banks for its day-to-day operations.

5.3 Domestic and International Credit Rating

Domestic

The domestic debt instruments of the Company continued to enjoy "AAA" rating - the highest rating assigned by CRISIL, CARE, India Ratings & Research and ICRA-Credit Rating Agencies.

International

The Company enjoys international credit rating equivalent to sovereign rating of India from International Credit Rating Agencies Moody''s and Fitch which is "Baa3" and "BBB-" respectively.

5.4 Cost of Borrowing

The overall weighted average annualized interest rate of borrowing for the funds raised during the financial year 2015-16 was 7.30% p.a. and for the borrowings outstanding as on March 31, 2016 is 8.21% p.a. As a result, your Company was able to deliver debt financing at competitive rates.

5.5 Redemption and Pre-Payment

During the year, the Company repaid a sum of Rs. 34,892.83 crore. This includes repayment amounting to Rs. 3.07 crore to the Government of India, Rs. 2,992.80 crore to non-priority / priority sector bond holders, Rs. 4,903.25 crore worth of Capital Gain Tax Exemption Bonds,Rs. 133.93 crore towards Infrastructure Bonds,Rs. 10,456.14 crore of External Commercial Borrowings and Rs. 403.64 crore of Official Development Assistance (ODA) loan. The Company also redeemed long term and short term loans from Banks and Financial Institutions of Rs. 475 crore and Commercial Papers of Rs. 15,525 crore.

5.6 Deployment of Resources at the close of the year

At the close of the financial year 2015-16, the total resources of your Company stood atRs. 2,06,352.97 crore. Out of this, Equity Share Capital contributed Rs. 987.46 crore, reserves and surplus stood atRs. 27,630.30 crore, Loans from Financial Institutions, Commercial Banks and market borrowings through Bonds and Commercial Papers accounted forRs. 1,69,106.38 crore, Deferred Tax Liabilities of Rs. 49.75 crore and other liabilities & provisions stood atRs. 8,579.08 crore. These funds were deployed as Long / Short Term Loans of Rs. 2,00,265.02 crore (net of provisions Rs. 1,013.27 crore), fixed assets (net of depreciation) of Rs. 150.32 crore (including Capital Work in progress), Investments of Rs. 2,466.62 crore, Cash & Bank Balances of Rs. 1,728.55 crore and other assets of Rs. 1,742.46 crore.

5.7 Policy Initiatives

The Company constantly reviews its policies/ procedures from time to time, to suitably align with market requirements and also with its corporate objectives and applicable statutory requirements. During the year, the Company has adopted / amended various policies and guidelines, such as Integrated Rating Methodology for Renewable Energy projects, Integrated Rating Guidelines for Coal Mines Financing (State Sector), Long Term Investment Policy, Guidelines on Project Financing Framework for Flexible Structuring, Guidelines on Refinancing of Project Loans, Guidelines on Regulatory Compliance regarding Stressed Assets and Policy for CSR assistance under Skill Development.

During the year, the Company has modified its existing policy constituted for granting rebates in interest rates/offering special interest rates and Medium Term Loan (MTLs).

Despite growing competition in the market, the Company has been able to maintain healthy spreads, balancing its objectives of business growth and Profitability during the year.

6. PRESENT DISTRIBUTION SCENARIO AND MAJOR CHALLENGES

The present scenario of Transmission and Distribution (T&D) industry is much more challenging in comparison to the past since we have achieved highest ever Generation Capacity addition during XI plan and further set a target for addition of over 88,000 MW during XII plan from conventional sources. The country is well on its course for achieving this target and the capacity of around 96% of the target has already been added. This achievement shall pose an urgent requirement for creation of requisite transmission and distribution infrastructure for effective utilization of power. The TRANSCOs and DISCOMs need to create this infrastructure and enhance their capital expenditure during forthcoming years to be able to provide reliable, robust & efficient system for transfer of power from generation facilities to sub-stations and up to the consumer end.

The T&D system basically comprises of transmission lines (inter-state and intra-state), Sub-stations, switching stations, transformers and distribution lines etc. of various voltage levels. Distribution has been identified as the weakest link in the power value chain and most difficult to deal with due to various reasons. The ever increasing demand for affordable, reliable and quality power by various classes of consumers makes distribution all the more challenging task. Your Company has always strived to play an active role in creation of new infrastructure and augmentation/strengthening of the existing network. Your Company encourages the DISCOMs to expedite various reform measures and to adopt best practices including modernization and automation of systems/smart grid, IT-enabled systems for metering and consumer services, other technology interventions in the distribution sector & helps them in improving their operational and financial performance. Since distribution is gateway for all the revenue coming into the power sector, it plays a pivotal role in development and sustainability of the power sector.

Major challenges presently being faced by distribution sector includes high level of accumulated losses & depleting net worth which is severely hindering their finances. High AT&C losses, limited capability to implement capital expenditure plans, delay in tariff order resulting in creation of regulatory assets, carrying cost of these regulatory assets, lack of tariff rationalisation leading to cross subsidy, open access issues, timely release of subsidy by State Government, delayed revenue collection cycle etc. have caused a dent in their cash flows. The overall performance of the state distribution utilities has been an issue of concern due to the above factors. Keeping in tune with the times and dynamic environment wherein utilities are struggling and striving hard to meet the consumer expectations, your Company today finances entire gamut of distribution projects broadly with the objectives of system improvement & augmentation, loss reduction measures, IT-enabling, consumer satisfaction etc. Your Company is always ready to consider special dispensation/requirements of DISCOMs based on the prudence/merit and sound appraisal mechanism. A dedicated Strategic Business Group has been set up in the Company for this purpose.

Your Company is playing a pivotal role in partnering with Ministry of Power, Government of India in all major initiatives and is committed to improve & turn around the power distribution sector in the country, by its deep involvement in programme like DDUGJY (Nodal Agency), IPDS, NEF (Nodal Agency), FRP (Financial Restructuring Plan), Smart Grid task force, Ujwal DISCOM Assurance Yojana (UDAY), etc. With all these major interventions your Company is optimistic that distribution scenario would be much better in not too distant future when the results and effect of above massive programmes in conjunction with the reform measures by the respective states starts trickling in and transform the entire landscape of distribution.

6.1 Major reforms in Distribution Sector

Government of India has made all efforts to intervene in the sector for ensuring overall development by way of Electricity Act, 2003 and various other policy measures such as National Tariff Policy, National Electricity Policy, Rural Electrification Policy etc., to provide a comprehensive framework and also the blueprint for power sector reforms. The sector has shown signs of improvement in operational and financial performance during last few years which have still to go a long way. The process of un-bundling, corporatization, instituting regulatory commission etc., has already been completed in most of the states, thus increasing their accountability and also providing more autonomy to the DISCOMs. Further, some of the DISCOMs have gone ahead in appointing franchisees on case to case basis in order to improve operational efficiency in particular areas.

In the past decade, Government of India (GoI) has launched several programmes to extend the benefits to the ailing DISCOMs such as R-APDRP with an objective to strengthen the infrastructure and to reduce the losses, RGGVY to ensure last mile connectivity and to release service connections to BPL, R-APDRP for undertaking improvements in urban pockets and to introduce IT enabling of distribution systems and presently DDUGJY and IPDS. Further, NEF - Interest Subsidy Scheme is also under implementation with objective to promote capital investment & expedite the reform process in distribution sector. Government of India has also made its intervention to restructure the loans to enhance liquidity situation of the DISCOMs in joint participation with State Government by way of FRP scheme. The financial outlay of DDUGJY is of Rs. 43,033 crore (with Rs. 33,453 crore as budgetary support from Government of India) and IPDS with total outlay of Rs. 32,612 crore (with Government budgetary support of Rs. 22,727 crore), should provide considerable fillip to the pace of capital investments in distribution sector without putting much strain on already stressed balance sheets of DISCOMs. REC is the Nodal Agency for implementation of DDUGJY and NEF scheme.

REC has been providing counterpart funding for a large number of R-APDRP projects which aim to reduce the Aggregate Technical and Commercial (AT&C) losses considerably in urban areas. Also, REC shall participate in funding of the loan component under DDUGJY and IPDS programmes.

Ministry of Power (MoP) has also been working on Integrated Rating System for all the state DISCOMs in the country which facilitates realistic assessment of performance. The system would enable these DISCOMs to weigh their strengths & weaknesses and facilitate a focused approach for achieving further improvements in their operational and financial performance. It will also aid in adoption of consistent approach by Banks/FIs while considering funding proposals of distribution companies.

The introduction of information & communication technology in power distribution sector shall enable the power system to become "SMART" & Near-real-time information shall allow utilities to manage the entire system as an integrated framework, actively sensing and responding to changes in power demand, supply, costs, quality of power. MoP is also working towards ensuring technological interventions through introduction of Smart Grid and has already extended financial assistance to several pilot projects. Similarly, better information enables consumers to manage energy use to meet their needs. The on-going measures under erstwhile R-APDRP programme will set a stepping stone equipping the DISCOMs to integrate with further technical advancements and to make the grid smarter.

Further, to evolve a road map for implementation of smart grids in India, MoP has constituted India Smart Grid Task Force (ISGTF), an inter-ministerial group. 14 Nos. Smart Grid Pilot Projects had been approved by MoP with 50% Government of India funding to test various functionalities in Indian Environment. The objectives of these Pilots cover - Power Quality Management (PQM), providing Advanced Metering Infrastructure (AMI), Outage Management (OM), Peak Load Management (PLM) and also DG (Distributed Generation) & Micro Grid functionalities. The Government of India is promoting development of 100 smart cities, which shall further lead to plethora of requirements and necessities in further adoption of technology and best practices in the distribution segment.

As is evident from above interventions, Government of India is working on two different fronts, one being to facilitate power to all and second to improve operational & financial performance of the utilities. The results of these measures have already started to show effects in terms of timely notification of tariffs by regulator in many states, filing of MYT petitions, claiming of Return of Equity in the ARR, release of revenue subsidy by state government, etc.

Though, so many initiatives have been taken by the Government of India, State Governments and DISCOMs, however the state of distribution segment on the consolidated level remains weak. The DISCOMs are having fragile balance sheets, face prolonged project execution delays, incurring lesser capital expenditure, engaging is reduced power procurement due to ongoing gap between per unit revenue and cost of supply. Though the utilities are working on reducing this gap through regular tariff filings and demand for Return on Equity by the DISCOMs, however the targets set for performance achievement are regularly being missed by majority of DISCOMs, leading to inadequate tariff transmission through the mechanism. The increased capital expenditure on part of DISCOMs may enable the strengthening of network such that the huge cost burden due to persistently high level of AT&C losses may be brought down and consequently the quality/reliability of supply to the end consumers may be ensured.

Ujwal DISCOM Assurance Yojana (UDAY)

The recent initiative by Ministry of Power, Government of India through Ujwal DISCOM Assurance Yojana (UDAY), launched in November 2015, is a path breaking reform for realizing the Hon''ble Prime Minister''s vision of affordable and accessible 24x7 power for all. It is another decisive step furthering the landmark strides made in the Power sector over the past two years, with the sector witnessing a series of historic improvements across the entire value chain, from fuel supply (highest coal production growth in over 2 decades), to generation (highest ever capacity addition), transmission (highest ever increase in transmission lines) and consumption (over 2.3 crore LED bulbs distributed).

Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development. Efforts towards 100% village Electrification, 24X7 power supply and clean energy cannot be achieved without performing DISCOMs. Power outages also adversely affect national priorities like "Make in India" and "Digital India".

Due to legacy issues, DISCOMs are trapped in a vicious cycle with operational losses being funded by debt. Outstanding debt of DISCOMs has increased from about Rs. 2.4 lakh crore at the end of 2011-12 to about Rs. 4.3 lakh crore at the end of 2014-15. UDAY assures the rise of vibrant and efficient DISCOMs through a permanent resolution of past as well as potential future issues of the sector. It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is through four initiatives (i) Improving operational efficiencies of DISCOMs; (ii) Reduction of cost of power; (iii) Reduction in interest cost of DISCOMs; and (iv) Enforcing financial discipline on DISCOMs through alignment with State finances.

6.2 National Electricity Fund

REC is the Nodal Agency for National Electricity Fund (NEF) - interest subsidy scheme having provision of Rs. 8,466 crore (against interest subsidy) to be provided over 14 years on loan disbursements amounting to Rs. 25,000 crore, for distribution schemes sanctioned during the 2 years viz. 2012-13 and 2013-14. Ministry of Power, Government of India shall provide interest subsidy on loans disbursed to the State Power Utilities, Distribution Companies (DISCOMs) - both in public and private sector, to improve the infrastructure in distribution sector. The scheme is aimed to incentivize much needed investment into distribution segment of power sector. The scheme is reform linked and interest subsidy is payable to the DISCOMs on achievement on reform based parameters outlined in NEF guidelines. The interest subsidy of 3% to 7% would be provided on loans taken by power utilities in distribution sector for all approved Distribution Sector Infrastructure capital works.

During the financial year 2012-13 & 2013-14, your Company has already sanctioned projects of Rs. 25,000 crore to 25 DISCOMs in 15 states for taking benefits under NEF. The utilities from the states of Uttarakhand, Madhya Pradesh, Haryana, Rajasthan, Andhra Pradesh and Telangana have already benefitted from the interest subsidy of Rs. 16.92 crore approved under the scheme. The other state DISCOMs will also start taking benefit of interest subsidy on loans availed based on their annual achievement on mainly two benchmark parameters i.e. reduction of AT&C losses & reduction in revenue gap (ACS & ARR).

7. FINANCING ACTIVITIES

The Company has been providing funding assistance for power generation, transmission & distribution projects besides for Electrification of villages. Details of major financing activities during the financial year 2015-16 are as under:

7.1 Generation

During the financial year 2015-16, your Company sanctioned 19 Nos. of Generation/R&M loans including 14 Nos. of additional loan assistance with total financial outlay of Rs. 27,828.44 crore including consortium financing with other financial institutions and has disbursed Rs. 12,819.53 crore against the ongoing generation projects.

The sector wise break up of loans sanctioned including additional loan assistances is as under:

(Rs. in crore) Particulars No. of Loans Loan Amount

STATE SECTOR

Fresh Loan 5

25,988.26

Additional Loan 2

PRIVATE SECTOR

Fresh Loan 0

1,840.18

Additional loan 12

Total 19 27,828.44

7.2 Renewable Energy

During the year, your Company sanctioned loan assistance of Rs. 2,965.72 crore to 11 new, grid-connected Renewable Energy projects with installed generation capacity aggregating 688 MW which included 9 Solar photo-voltaic projects aggregating 662 MW; 1 Biomass project of 6 MW and 1 Wind project of 20 MW. The total cost of these projects aggregates Rs. 4,444.78 crore. Further, during the financial year 2015-16, total disbursement was Rs. 304.07 crore as detailed below:

Particulars Unit FY 2015-16 FY 2014-15

Projects Sanctioned Nos. 11 8

Capacity of Sanctioned Projects MW 688 193.86

Cost of Projects Rs. crore 4,444.78 1,768.19

Loan Sanctioned Rs. crore 2,965.72 547.92

Loan Disbursed Rs. crore 304.07 295.25

7.3 Transmission & Distribution

Your Company continued to play an active role in creation of new infrastructure and improvement of the existing ones under the transmission and distribution network in the country under its T&D portfolio. In line with the Government of India''s objective to provide power for all by creation of infrastructure and also to reduce the AT&C losses, your Company has been financing schemes for expansion and strengthening of the transmission network and more importantly, modernizing the distribution system.

During the financial year 2015-16, your Company sanctioned 579 Nos. of Transmission and Distribution schemes involving a total loan assistance of Rs. 23,627.61 crore. This includes primary power evacuation schemes associated with generating plants, system improvement schemes including R-APDRP projects, feeder segregation schemes, bulk loan schemes, intensive Electrification schemes and pumpset energisation schemes.

The state-wise and category-wise break-up of loans sanctioned during the financial year are given in enclosed Table 1 & 2, respectively. The major programmes covered by your Company under T&D sanctions in brief are as under:

7.3.1 System Improvement & Bulk Loan

To overcome the system deficiencies and to improve the quality and reliability of power supply, your Company finances system improvement schemes, based on system studies of an electrical distribution network considering present status of system capacities, connected demand, voltage profiles and level of losses, together with scope for future load growths.

The system improvement programme also includes Bulk loan schemes meant for procurement and installation of meters, transformers, capacitors, conductors, poles, etc. system improvement schemes reduce the AT&C losses to a great extent.

During the year 2015-16, a total of 511 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs. 21,773.84 crore. This included: (i) 90 schemes involving a loan assistance of Rs. 3,830.00 crore for financing investment in the distribution system by way of installation of essential equipment like transformers, meters, capacitors, etc.; (ii) 171 schemes for Rs. 7,186.82 crore for improving the distribution system; (iii) 36 schemes involving loan assistance of Rs. 1,317.91 crore towards counterpart funding of Part B of R-APDRP projects; and (iv) 250 schemes for loan assistance of Rs. 10,757.02 crore for improving the transmission network.

7.3.2 Intensive Electrification

Schemes under this activity mainly aim at intensive Electrification of already electrified villages. During the year 2015-16, a total of 6 intensive Electrification schemes were sanctioned involving a loan outlay of Rs. 210.87 crore.

7.3.3 Pumpsets Energisation

REC''s loan portfolio also includes extension of loan assistance for energisation of agricultural pumpsets. During the year 2015-16, under REC financed schemes, 2,13,926 Nos. electric irrigation pumpsets were reported as energized. A loan assistance of Rs. 324.99 crore was sanctioned for 26 new schemes during the year under this category. The state-wise details and cumulative position of pumpset energized up to March 31, 2016 are given in the enclosed Table-5.

7.4 Short Term Loans and others

During the financial year 2015-16, your Company has also sanctioned loans assitance of Rs. 11,049.33 crore to various power utilities, in the form of short term loans, medium term loans & special loans, to meet their funds requirement of short/ medium term & working capital, etc.

7.5 Financing Activities in North Eastern States

During the financial year 2015-16, a loan assistance of Rs. 233.16 crore towards cost overrun was sanctioned for Generation scheme to M/s Teesta Urja Limited and M/s Dans Energy Private Limited located in North Eastern Region (Sikkim). A loan assistance of Rs. 12.68 crore was sanctioned to M/s Meghalaya Power Transmission Corporation Limited for Transmission projects.

A total sum of Rs. 839.05 crore was disbursed during the financial year 2015-16 as against Rs. 418.99 crore in the previous year for Generation projects in North Eastern states which include Rs. 23.20 crore to M/s Lanco Energy Private Limited, Rs. 38.22 crore to M/s Dans Energy Private Limited and Rs. 777.60 crore to M/s Teesta Urja Limited.

7.6 Appraisal System for Financing

REC has its own methodology for appraisal of Private Sector Power Generation and Transmission Projects and the grading of the State Power Utilities. REC''s interest rates are linked to the grades assigned to the private sector projects and State Power Utilities. REC, along with PFC, assists the Ministry of Power in bringing out integrated ratings for State Power Distribution Utilities and adopts the ratings as revised by Ministry of Power from time to time to ensure uniformity in approach by various Banks/ Financial Institutions. The grading of State Power Utilities is an on-going process based on various parameters viz. financial, technical, tariff, regulatory measures, government support and management, etc.

7.7 New policy/financing initiatives under Strategic Business Group (SBG) and Investments made during the financial year 2015-16.

The Strategic Business Group (SBG) of the Company formulated policies to tune with the changes in the regulatory environment in the areas of project loan refinancing, flexible structuring and monitoring of stressed assets.

The Company has framed a policy for funding of State Sector Coal Mining Projects as a new financing opportunity. The Company also formulated a ''Long Term Investment Policy'' to augment the long term investment opportunities for the Company. Under the ambit of Long Term Investment Policy, the Company has made total investment of Rs. 1,500 crore in Tier-I Bonds of Indian Bank, Vijaya Bank & Syndicate Bank (Rs. 500 crore in each bank), during the financial year 2015-16. Further, the Company has subscribed to 26,05,42,050 fully paid equity shares of NHPC Limited under Offer For Sale (OFS) at a cost of Rs. 21.78 per equity share of Rs. 10/- each aggregating to Rs. 567.50 crore in April, 2016.

8. INTERNATIONAL COOPERATION & DEVELOPMENT

REC has three lines of ODA credit with KfW, Germany. All of them have been fully drawn as on March 31, 2016. KfW-I and KfW-II ODA loan are of EUR 70 million each (approx. Rs. 454.02 crore & Rs. 480.97 crore, respectively) and KfW-III is of EUR 100 million (approx. Rs. 753.73 crore). Apart from above, REC has two line of ODA credit with JICA, Japan. Both of them have also been fully drawn. Under JICA-I & II ODA loans, cumulative amounts of JPY 16,949.38 million (approx. Rs. 820.12 crore) and JPY 11,809.48 million (approx. Rs. 640.64 crore) respectively, has been drawn as on March 31, 2016.

9. DEENDAYAL UPADHYAYA GRAM JYOTI YOJANA (DDUGJY)

Ministry of Power vide OM dated December 3, 2014, conveyed sanction of the President for launch/implementation of Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), an integrated scheme covering all aspects of rural power distribution. Under the scheme 60% of the project cost (85% for special States) is provided as grant by Government of India and additional grant upto15% (5% for special States) is provided by Government of India on achievement of prescribed milestones. All erstwhile RE schemes (including Rajiv Gandhi Grameen Vidyutikaran Yojana) have been subsumed in DDUGJY. REC is the Nodal agency for implementation of DDUGJY.

Continuation of RE Scheme in XII and XIII five year plans was also approved by Ministry of Power with capital subsidy of Rs. 35,447 crore, out of which Rs. 23,397 crore would be met through Gross Budgetary Support (GBS) for XII five year plan and remaining Rs. 12,050 crore in XIII five year plan.

The main objectives of the scheme are to provide access to all rural households and reduction of AT&C losses as per trajectory (DISCOM-wise) finalized in consultation with States by the Ministry of Power, so as to achieve 24x7 power supply for non- agricultural consumers and adequate power supply for agricultural consumers through the following project components:

i. Separation of agriculture and non-agriculture feeders facilitating improved quality power supply to non-agricultural consumers and adequate power supply to agricultural consumers in the rural areas;

ii. Strengthening and augmentation of sub-transmission & distribution infrastructure in rural areas;

iii. Micro-grid and Off-grid distribution network;

iv. Metering of distribution transformers/feeders/consumers; and

v. Rural Electrification works (including the erstwhile RGGVY).

In this scheme, earlier population criteria for eligibility of villages/hamlets have been removed and villages/ habitaions having less than 100 population is also eligible.

In order to realise the objectives of the scheme, participation of all the stakeholders particularly, public representatives has already been institutionalised through constitution of District Electricity Committees (DEC) under the Chairmanship of senior most Member of Parliament. DEC is empowered to monitor and review the implementation of DDUGJY.

9.1 UE Mission

At the time of independence, only 3,060 villages had electricity and hence, there was continuous emphasis on village Electrification. India''s rural Electrification programme passed through several stages. Inspite of many programmes of Government of India, as on April 1, 2015, 18,452 villages were still left for Electrification which are mainly located in Odisha (3,428), Assam (2,892), Bihar (2,747), Jharkhand (2,581), Arunachal Pradesh (1,578), Meghalaya (912), etc.

On August 15, 2015, Hon''ble Prime Minister announced that all remaining Un-Electrified (UE) villages would be electrified within 1,000 days. The Ministry of Power has taken up the Electrification of all 18,452 UE villages on Mission mode.

But these remaining 18,452 UE Villages are located in highly inaccessible areas (thickly forested, mountainous regions, etc.), with tough terrain, extreme temperatures, areas facing Right of Way (RoW) issues or areas plagued by insurgency and Left- wing extremism. Keeping in view these challenges and pace of Electrification of villages during last few years, it would have taken nearly 10 years to electrify the remaining villages.

REC had the experience of successfully constructing around 12,000 toilets under Swachh Bharat Abhiyan with the help of milestone-based micro-monitoring mechanism. Drawing an analogy from this, REC has developed an innovative monitoring mechanism which is blend of technology and right manpower at ground level.

A new monitoring mechanism was set up to get regular progress of each village. Under this, entire process of village Electrification is divided into 12 milestones. Young electrical engineers: ''Gram Vidyut Abhiyanta (GVA)'' were appointed at block/district level. In order to shoulder this mission and accelerate its pace, ''GARV APP'', well acknowledged for its transparent and accountable mechanism was designed and brought into development. The APP was launched by Hon''ble Power Minister on October 14, 2015. The GARV APP is designed in such a manner that it is able to delicately monitor and scrutinize the progress of Electrification statuses of all the 18,452 Un-Electrified villages through an online system.

The Salient features of GARV APP are Real-time dashboard, Paper-less working, Capturing village-wise milestones, Uploading photographs/ Global Positioning System (GPS) Coordinates, Timely highlighting of implementation hurdles, if any, Habitation- wise infrastructure, Allows offline data entry, Tracking of delay in implementation of works, Segregation of uninhabited villages, State-wise snapshots, Adoption of villages/districts/states & view their respective customized dashboard and also feedback and suggestions from users.

Achievement so far:

The new monitoring mechanism helps for improving pace of village Electrification. This results during the year 2015-16, 7,108 villages were electrified and on August 11, 2016, the achievement has crossed 10,000 UE villages.

9.2 Performance during financial year 2015-16

a. Sanctions

Under DDUGJY, during the financial year 2015-16, for Electrification through grid, projects for Rs. 31,376.34 crore (Loan & Subsidy) in 25 States have been approved by the Monitoring Committee of Ministry of Power.

In addition to above, Decentralized Distributed Generation (DDG) projects have also been sanctioned under DDUGJY, for providing electricity access to the un-electrified villages/habitations where grid connectivity is neither feasible nor cost-effective. DDG can be from conventional or renewable sources such as biomass, biofuels, biogas, mini hydro, solar, etc. Subsidy of 60% (85 % for special category states) of the project cost is provided under DDG scheme. However, an additional subsidy of 15% (5 % for special category states) is applicable subject to timely completion of DDG projects.

During the financial year 2015-16, for DDG (Off-grid) projects, Rs. 869.30 crore have been sanctioned in 9 states. Also, 232 projects have been commissioned in the states of Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Kerala & Uttarakhand, in the financial year.

b. Fund releases

Under the scheme, during the financial year 2015-16, a sum of Rs. 5,023.99 crore (Loan Rs. 419.01 crore & SubsidyRs. 4,604.98 crore) has been disbursed to the implementing agencies.

The subsidy from Government of India is channeled through REC and the balance amount can be arranged by the State Government /Implementing Agency through Loan/Equity.

c. Progress of Electrification

During the financial year 2015-16, under DDUGJY, Electrification works in 7,108 un-electrified villages and intensive Electrification in 39,236 villages have been completed. Also free electricity connections have been provided to 14.39 lakh BPL households.

The details of state-wise sanction, fund released & progress of Electrification during the financial year 2015-16 are given in enclosed Table-6.

9.3 Cumulative Performance upto March 31, 2016

Under DDUGJY, cumulatively up to March 31, 2016, 4,466 projects for Rs. 1,07,760.07 crore have been sanctioned and against That Rs. 41,061.48 crore (Loan & Subsidy) has been disbursed to the implementing agencies.

As regards progress, cumulatively upto March 31, 2016, Electrification works in 1,16,144 un-electrified villages and intensive Electrification in 3,51,233 villages have been completed. Also, free electricity connections have been provided to 232.22 lakh BPL households.

The state-wise details of cumulative sanctions, fund release & achievements are given in enclosed Table-7.

10. STANDARDISATION, QUALITY CONTROL & MONITORING

Your Company has continually provided technical expertise in the distribution system to State Power Utilities. The technical specifications and construction standards issued by the Company are used extensively by the State Power Utilities. The Company, in order to promote new technologies, has been continuously looking for innovations using latest R&D in the fi eld of power distribution.

In line with the three-tier Quality Control Mechanism for ensuring proper quality of materials and works in implementation of RE component of DDUGJY XI & XII five year plan schemes, REC Quality Monitors (RQMs) under Tier-II have been appointed covering 413 projects in 25 states under XI plan (Phase-I&II) and 273 projects in 15 states under XII Plan. Further, during the financial year 2015-16, RQMs have undertaken inspections of 286 villages in XI Plan Phase-I projects, 950 villages & 75 Nos. of material inspections in XI Plan Phase-II projects and 733 Nos. of material inspections were carried out in XII Plan projects at manufacturer premises for ensuring quality of works. Also, your Company successfully accomplished the MoU target of Monitoring of Assets financed/Collaterals and supervision of loans given to various SEBs / DISCOMs / TRANSCOs / GENCOs and Private Companies for Single Project during construction/before CoD having outflow more than Rs. 500 crore.

11. RISK MANAGEMENT

The Company has a Risk Management Policy which covers Asset Liability Management (ALM) Policy and Hedging Policy. ALM Policy provides a framework for defining, measuring and monitoring the mismatches and Hedging Policy covers the management of currency risk.

11.1 Asset Liability Management

The Company has constituted an Asset Liability Management Committee (ALCO) which is functioning under the chairmanship of CMD and comprises of Director (Finance), Director (Technical), Executive Directors and General Managers from Finance and Operating Divisions as its members.

ALCO monitors risks related to liquidity, interest rates and currency rates. The liquidity risk is being monitored with the help of liquidity gap analysis and the Committee manages the liquidity risk through a mix of strategies such as forward looking resource raising programme based on projected disbursement and maturity profile. The interest rate risk is monitored through interest rate sensitivity analysis and monitored through review of lending rates, cost of borrowings and the reset terms of lending & borrowing. Foreign currency risk associated with exchange rate and interest rate is monitored through various derivative instruments. In terms of MoU target, the annual mismatch between Recoveries and Debt Servicing has been within limit and was 2% for financial year 2015-16.

11.2 Enterprise-Wide Integrated Risk Management

The Company is having a Risk Management Committee (RMC) which is functioning under the chairmanship of Part-time Non Official Independent Director and it comprises of Director (Finance) and Director (Technical) as its members for monitoring the integrated risks of the Company.

The main function of RMC is to monitor various risks likely to arise including the project risk along with the categorization for the loan amount outstanding of Rs. 500 crore & above and practices adopted by the Company and also to suggest action for mitigation of risk arising in the operation and other related matters of the Company. The Company has identified its various risks and has taken various steps to mitigate them. The brief description of the risks is as below:

i) Credit Risk:

Credit risk is a risk inherent in the financing industry and involves the risk of loss arising from the diminution in credit quality of a borrower and the risk that the borrower will default on contractual repayments under a loan or an advance. To mitigate the same, the Company follows systematic institutional and project appraisal process to assess the credit risk. These processes include a detailed appraisal methodology, identification of risks and suitable structuring and credit risk mitigation measures.

ii) Market Risk:

Market risk is the potential loss arising from changes in market rates and market prices. Our primary market risk exposures result primarily from fluctuations in interest rates and foreign currency exchange rates. In order to mitigate the interest rate risk, Company periodically reviews its lending rates based on prevailing market rates and our weighted average cost of borrowing.

iii) Liquidity Risk:

Liquidity risk is the risk of potential inability to meet our liabilities as they become due. We face liquidity risks, which could require us to raise funds or liquidate assets on unfavourable terms. We manage our liquidity risk through a mix of strategies, including through forward-looking resource mobilization based on projected disbursements and maturing obligations.

iv) Foreign Currency Risk:

Foreign currency exchange risk involves exchange rate movements among currencies that may adversely impact the value of foreign currency-denominated assets, liabilities and off-balance sheet arrangements. The Company manages foreign currency risk associated with exchange rate and interest rate through various derivative instruments. For this, the Company has put in place a Hedging Policy to manage risk associated with foreign currency borrowings.

v) Legal Risk:

Legal risk arises from the uncertainty of the enforceability of contracts relating to the obligations of our borrowers. This could be on account of delay in the process of enforcement or difficulty in the applicability of the contractual obligations. We seek to minimise the legal risk through legal documentation and forward-looking contractual provisions in the legal documents.

vi) Operational Risk:

The Company is facing operational risks arising out of RBI prudential norms, NPA management, other regulatory measures, compliances and Government policies, affecting the project financing in power sector. The Company is continuously following up with RBI & other regulatory agencies and consistently taking steps to strengthen its internal systems and procedures to recognise and reduce operational risk in the business.

12. PREFERRED CUSTOMER POLICY

As a part of business promotion strategy, a Preferred Customer Policy was formulated in 2008 with the basic purpose of offering an enhanced level of services to the Company''s customers and to have a long term mutually beneficial relationship with them.

The Policy lays down the eligibility criterion which takes into account various factors such as amount of loan outstanding, duration of loan relationship, repayment track record of the borrower etc. for determining preferred customers and sponsoring them for capacity building/domestic/international seminars/training programmes organized by various external agencies as well as CIRE, Hyderabad.

13. INFORMATION TECHNOLOGY INITIATIVES

The Integrated ERP system is in operation in REC since 2009, covering major business functions of Company which is being improved continuously by adding new features. Benefits of ERP system has been extended to the borrowers also as a part of better service. Process for Upgradation of ERP to newer version has been initiated.

Transformation of existing HR process into online IT driven HR process wherein employees can initiate HR request online on internet through ERP based employees self-service portal, which is being operationalized in phased manner at all Offices of REC.

Towards achieving efficient e-governance and transparency in procurement, now all procurement of goods and services of value above Rs. 2 lakh is being done through the e-procurement system. The system is also capable of conducting e-Reverse Auction as per CVC guidelines. In addition, REC has deployed a number of in-house developed systems viz. Annual Property Return, Bill payment and tracking system, Visitor Management System, File Movement System, etc.

Both the Primary Data Centre (PDC) and Disaster Recovery Center (DRC) of REC are ISO/IEC 27001:2013 Certified and comply to National Cyber Security Policy of Government of India as notified by MeitY (Ministry of Electronics and Information Technology). In addition number of information security audits are conducted through CERT-in certified auditor, internal auditor on a continuous basis.

REC has implemented Video Conferencing solution across all of its Offices throughout the Country.

Corporate Office of REC has become Wi-Fi enabled. This was one of the MoU target for the financial year 2015-16 which has been successfully achieved on December 11, 2015, i.e. within the target date. All field Offices of the Company are also being made Wi-Fi enabled. Also, another MoU target of Implementation of HR-ERP Employee Self Service (ESS) Portal over Internet has been accomplished within the cut-off date.

IT Division is also promoting in the Company number of IT initiatives of Government of India like MyGov, e-Governance, Digital India, etc.

Computer to Employee population (other than Class-IV employees) is 100%. IT Division also organizes and impart various training programmes.

14. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION (CIRE)

CIRE was established at Hyderabad in 1979 under the aegis of REC to cater to the training and development needs of engineers and managers of Power Sector. The programmes are conducted on the state-of-art subjects of Power Generation, Transmission, Distribution and Renewable energy sources. On July 23, 2015, CIRE was conferred with "Education Leadership Award" by ABP News in recognition of ''Leadership, Development, Innovation and Industry Interface'' of the Institute.

14.1 National Training Programmes (NTP) under DDUGJY

CIRE is designated as a nodal agency by Ministry of Power for implementation of National Training Programmes (NTP) for employees of C&D category under the Human Resources Development component of DDUGJY programme. A target of training 1,25,000 employees of C&D category was set to be achieved by CIRE during XII plan period. As on March 31, 2016, CIRE was able to organize training of 98,833 employees of C&D category of various power distribution utilities, which includes 32,013 employees of C&D category trained during 2015-16. CIRE/REC has entered into MoAs with 37 Power Utilities/ Training Institutes to conduct the above programmes. A 2-day workshop at CIRE Campus for Nodal Officers of DISCOMs was also organized about the programmes.

CIRE on the request of power utilities, has organized 55 Programmes for employees of C&D category with 1,365 participants at various locations and has also conducted 4 Training of Trainers (ToT) programmes for 93 participants.

14.2 R-APDRP Programme

CIRE, was empanelled as partner training institute to organize R-APDRP programmes sponsored by Ministry of Power. During the year, 2 Nos. Training-of-Trainers programmes under R-APDRP on "Revenue Management & Loss Reduction" with 21 participants from different power utilities were organized.

14.3 International Programmes

CIRE is empanelled by Ministry of External Affairs, Government of India to organize training programmes in the area of power sector under Indian Technical & Economic Cooperation (ITEC)/ Special Commonwealth Assistance for Africa Programme (SCAAP). During the year, CIRE has organized 9 International programmes with 132 participants, on various topics, viz. Financial Management and Accounting System for Power Companies (8 weeks); Planning and Management of Power Transmission & Distribution Systems (8 weeks); Decentralized Distributed Generation & Rural Power Distribution Management (8 weeks); Design, Erection, Operation & Maintenance (O&M) of Extra High Voltage (EHV) Sub-Stations (4 weeks); Solar Power Generation - Grid Enabling (4 weeks); Best Practices in Power Distribution (5 weeks); Management of Power Utilities using IT/Automated Solutions (5 weeks); Trends and Developments in Electric Power Generation (8 weeks) and Certificate Course in Electric Power Management (12 Weeks).

The participants from countries, viz. Afghanistan, Algeria, Bangladesh, Bhutan, Burundi, Cambodia, Cameroon, Democratic Republic of the Congo, Ecuador, Egypt, Gambia, Ghana, Kenya, Malawi, Mauritius, Myanmar, Nepal, Nigeria, Niger, Philippines, Russia, Samoa, Saint Lucia, Sudan, Syria, Tanzania, Thailand, Zimbabwe, etc., have attended the programmes.

14.4 Regular National Programmes

CIRE has organized 20 Regular Training Programmes for the personnel of various Power Utilities/Distribution Companies, on different topics such as, Pilferage of Electricity - Issues, Challenges and Remedial Measures; Ind AS (International Financial Reporting Standards) Adoption in Power Sector; Solar Photovoltaic System - Quality and Performance; Technical Specifications and Construction Standards for Distribution System; Protection System in EHV Sub-Stations; Power Trading & Exchange; Earthing Practices and Safety Measures in Electrical Installations; Open Access, Power Trading and Availability Based Tariff; Gas Insulated and Indoor Sub-stations including Power & Control Cables; Testing, Commissioning and Protection aspects in 33/11 KV Sub-stations; Power Factor Improvement and Reactive Power Management; Power Purchase Agreement; Tariff Policy & Submission of ARRs - Regulatory Compliance; Best Practices in O&M of EHV Sub-stations and Lines; Efficiency Improvement Measures in Thermal Power Station; Technical Aspects for Non-Technical Executives; and Latest Trends in Metering, Billing and Collection. A total number of 243 participants attended the above programmes.

14.5 Programmes organised in collaboration

CIRE has organised training programmes in collaboration with premier Management Institute i.e. Institute of Public Enterprise and conducted 5 programmes during the financial year 2015-16, viz. Best Practices in HR Management of Power Utilities; Procurement and Materials Management; Companies Act, 2013 and HR for Line Managers with 45 participants.

14.6 Customized Programmes

During the year, 26 customized programmes were organized for different Power Utilities and out of these 19 programmes were organized for Andhra Pradesh Power Utilities, such as APTRANSCO, APSPDCL and APEPDCL, 6 programmes were organized for the executives of Punjab State Power Corporation Limited (PSPCL) on "Power Distribution Management" and 1 induction programme of 6-week duration was organised for APSPDCL engineers at CIRE campus. In total, 475 participants were trained under customized programmes.

14.7 In-house Training Programmes

CIRE has also organised 6 in-house programmes for the employees of REC and 53 Employees have taken part in these programmes. The topics covered are Procurement Guidelines; Communication & Negotiation Skills; General Management; Leadership & Teamwork; REC Specifications & Construction Standards; and Finance for Non-finance.

14.8 In all, during the year 2015-16, in addition to coordinating and monitoring the National Training Programmes for employees of C&D category, sponsored by Ministry of Power, CIRE has conducted 128 programmes on various themes and trained 2,471 personnel with 14,353 mandays of training.

15. ISO 9001:2008 QUALITY ASSURANCE CERTIFICATION

The Company has implemented Quality Management Systems as per ISO 9001:2008 standards in six major Divisions of Corporate Office and all Zonal / Project Offices across the country for claims processing.

16. HUMAN RESOURCE MANAGEMENT

In order to professionalize the Executive strength of the Company and also to infuse fresh blood, 44 Executives were appointed through open advertisement and 8 Executives were appointed through Campus Recruitment during the financial year. The total manpower of the Company as on March 31, 2016 was 600 employees which includes 463 Executives and 137 Non-Executives.

16.1 Reservation in Employment

The directives issued by the Government of India regarding reservations for SC/ST etc. in appointment and promotion to various posts were complied with. The group wise details of SC and ST employees out of total strength as on March 31, 2016 are given below:

GROUP NUMBER OF EMPLOYEES

TOTAL SC ST

FY 2015-16 FY 2014-15 FY 2015-16 FY 2014-15 FY 2015-16 FY 2014-15

A 391 359 40 33 14 12

B 99 121 13 17 2 2

C 36 42 6 7 0 0

D 74 79 22 24 1 1

Total 600 601 81 81 17 15

As on March 31, 2016, 14 employees out of total employees are in the category of persons with disabilities which amounts to 2.33% of total manpower of the Company.

16.2 Training & Human Resource Development

As a measure of capacity building including up-gradation of employees'' skill sets and to ensure high delivery of performance, Training and HRD continued to receive priority during the financial year. Training and Human Resource Policy of the Company aims and sharpening business skills and competence required for better employee performance and provides all possible opportunities and support to the employees to improve their performance and productivity. Training was also provided to promote better understanding of professional requirements as well as to sensitize employees to socio-economic environment in which business of the Company is carried out. Training which helped employees benefit in spiritual, health and attitudinal change process was also imparted.

In order to equip the employees professionally, the Company sponsored 251 employees to various training programmes, workshops etc., within the country and abroad. In addition, 7 training programmes were conducted in-house which were attended by around 151 employees. Taken together, these initiatives enabled the Company to achieve 1096 training mandays and also achieve the MoU target of ''Excellent'' rating for this parameter. These included exposure of executives to training programme on the subject of Team work and Leadership and Exposure of Top & Senior Management Team to training on advanced management programmes under which 105 mandays and 109 mandays were achieved as against a MoU target of 90 and 100 mandays, respectively. 19 Executives were deputed for programmes in countries like Japan, U.K, France & China.

16.3 Employee Welfare

In order to provide improved health care facilities to the employees and their dependent family members, the Company has expanded the list of empanelled hospitals under Direct Payment Scheme by adding 6 hospitals. Further, part time services of 4 specialized doctors were engaged to provide onsite medical facilities to employees. The Company has also been funding sports & recreation equipment for use by employees and to promote well-being of employees.

Sports Activities

During the financial year 2015-16, REC hosted an Inter-CPSU Carrom Tournament and also sponsored its employees for various Inter- CPSU sports tournaments such as Badminton, Table Tennis, Volley Ball, Kabbadi, Chess etc., organized by various power sector CPSUs under the aegis of Power Sports Control Board (PSCB). Further, employees were encouraged to participate in various quiz, paper presentations and simulation competitions conducted by reputed institutions.

16.4 Representation of Women Employees

As on March 31, 2016, the Company had 97 permanent women employees, which represent 16.17% of the total work force. There is no discrimination of employees on the basis of gender. A Women Cell has been in operation in the Company to look after welfare and all round development of women employees. International Women''s Day was celebrated by REC Women Cell and a health check-up camp was also organized exclusively for women employees.

16.5 Industrial Relations

The Industrial Relations scenario in the Company continued to be cordial and harmonious in the financial year 2015-16. There was no loss of mandays on account of industrial unrest. Regular interactions were held with REC Employees Union and REC Officers Association on issues of employee welfare. This has helped to build an atmosphere of trust and cooperation resulting in a motivated workforce and continued improvement in business performance.

16.6 Public Grievance Redressal Machinery

In accordance with the guidelines issued by the Government of India, the Company has constituted a Grievance Redressal Committee to redress the grievances of employees.

17. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

The ''REC Corporate Social Responsibility & Sustainability Policy'' prepared in line with the provisions of Companies Act, 2013 and Rules thereunder, The Companies (Corporate Social Responsibility Policy) Rules, 2014, and Guidelines for CSR and Sustainability for Central Public Sector Enterprises issued by Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises, effective from April 1, 2014, was approved by the Board of Directors of the Company. The ''REC Corporate Social Responsibility & Sustainability Policy'' is available on the website of the Company.

During the financial year 2015-16, the Corporate Social Responsibility and Sustainable Development (CSR & SD) initiatives of the Company were continued with a view to integrate REC''s business operations with social processes while recognizing the interests of its stakeholders. CSR & SD projects were linked with the principle of sustainable development. The strategic focus was aimed at CSR & SD initiative towards fulfilling the National Plan goals and objectives including Millennium Development Goals ensuring gender sensitivity, skill enhancement, entrepreneurship and employment generation by co-creating value with local institutions/ people. While identifying such initiatives the Company has adopted an integrated approach to address the community, societal and environmental concerns measured in terms of triple bottom line approach. During the year, the Company has undertaken various CSR initiatives in the fields of skill development programmes, education, environmental sustainability, promotion of health care including for old age and persons with disabilities, drinking water and sanitation facilities including participation in Swachh Vidyalaya Abhiyan, solar smart micro grid lights in select un-electrified/ poorly electrified villages, etc. The CSR strategy has been developed with action plan in project-based accountability approach. Most of the CSR activities have been implemented in project-mode, with baseline survey, specified time-frame, identified milestones and periodic monitoring and impact assessment. Disbursement of allocated funds under CSR was linked with achievement of the milestones and deliverables. During the financial year 2015-16, financial assistance aggregating to Rs. 163.17 crore was sanctioned for various projects under Corporate Social Responsibility and expenditure of Rs. 128.20 crore was incurred, including amount provided.

In terms of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Annual Report on CSR activities is annexed to this Report.

18. VIGILANCE ACTIVITIES

Vigilance Division constantly endeavored to optimize probity and integrity and promote professionalism, ethical work culture and discipline among the employees. The emphasis of Vigilance Division was primarily on streamlining the systems and policies and inculcating transparency and accountability in the work processes.

Vigilance Division constantly tried to identify vulnerable areas in the systems and procedures to reduce the scope of arbitrariness and discretion in decision making to the extent possible. The Division regularly pursued with all concerned to ensure that CVC''s instructions were strictly implemented in the Company. Pursuant to vigilance initiative, Integrity Pact, File Movement System, Bill Tracking System and Security System in Corporate Office premises were implemented/ operationalised. Also a training programme for the newly recruited Officers in REC with respect to REC CDA Rules, Tendering procedure, e-procurement etc. was organized. REC Procurement Guidelines encompassing all relevant instructions issued by CVC/Ministry of Power, etc. have been revised.

Almost all tenders aboveRs. 5 lakh were processed through e-Procurement mode w.e.f. April 1, 2015. All concerned divisions were advised to comply with the instructions of CVC with respect to award of contract on single tender/nomination basis. The guidelines for compliance of password policy for accessing ERP/E-mail/Software applications were formulated and uploaded on REC Intranet.

Regular review meetings were taken up by Vigilance Division with operating divisions on the existing systems and procedures to make these more transparent and accountable. Scrutiny of tendering procedure was carried out randomly and suggestions were given to further improve/streamline the tendering mechanism.

REC observed Vigilance Awareness Week (VAW) from October 26, 2015 to October 31, 2015. At Corporate Office, Quiz Competition and Lectures were organized. Lectures on Ethics, Transparency and Integrity were also organized in three colleges of Delhi University and Elocution Competition was held in two schools in Delhi. A hand book on ''REC Code of Ethics'' was brought out covering important aspects of integrity, probity, work culture, employee''s competencies, ethical behavior, etc. Various activities viz. essay writing/debate competition and public awareness rallies, etc. were also organized in Zonal/ Project Offices of REC and CIRE, Hyderabad.

Regular/surprise inspections were carried out by Officers of Vigilance Division in field Offices and employees were sensitized about the importance of Vigilance. Audit Reports were scrutinized from a vigilance point of view.

With a view to enhance the knowledge of employees on vigilance related issues, a Vigilance Bulletin was issued periodically. The details of Immovable Property Returns (IPRs) of all Executives have been uploaded on REC''s Website and vigilance clearance has been linked with timely submissions of IPRs. Annual Property Returns of the employees were subject to systematic scrutiny. The performance of Vigilance Division was reviewed periodically by the CVC, Board of Directors and CMD in addition to regular reviews undertaken by the CVO in accordance with the prescribed norms.

19. IMPLEMENTATION OF OFFICIAL LANGUAGE

The Company has been implementing the provisions of Official Language Policy of the Department of Official Language, Government of India. The quarterly meetings of Official Language Implementation Committee (OLIC) were held regularly to review the progressive use of Hindi in the Company under the chairmanship of CMD. To review and encourage employees to use Hindi and implementation of Annual Programme 2015-16, was the primary concern of these meetings.

The Parliamentary Committee on Official Language held the inspections of REC Project Office, Hyderabad on April 9, 2015 and REC Corporate Office on January 21, 2016. Officials from Department of Official Language under Ministry of Home Affairs conducted the inspection of the Corporate Office. Further, Internal Inspections were carried out to assess the progressive use of Hindi in 9 divisions of Corporate Office and its 6 Project Offices.

Nodal Hindi Officers were nominated in all Zonal/Project Offices of REC to ensure proper implementation of Official Language policy.

A Hindi Pakhwara was organized from September 14 - 28, 2015 in the Company in which 9 competitions were organized for the employees. 47 employees won prizes in different categories, in these competitions.

During the financial year 2015-16, four Hindi Practice based workshops were organised at the Corporate Office in which 125 Executives/Non-Executives participated. Further, a Zonal Hindi Workshop was also organized on August 19-20, 2015 at REC,

Zonal Office, Bangluru for the employees of REC ''C region in which 19 employees including Nodal Hindi Officers of the respected Offices were trained.

The Company has also been awarded "Rajbhasha Gaurav Samman" by Rashtrabhasha Swabhiman Nyas for its concerted efforts made in implementation of Official language policy.

To create a conducive atmosphere for working in Hindi and to facilitate original work in Hindi, books such as English-Hindi, Hindi-English dictionaries, help and reference-Literature, technical glossaries are widely publicized. Besides, fi fty per-cent of the expenditure, earmarked for purchase of books has been utilized for purchase of books published in Hindi.

20. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO.

20.1 Conservation of Energy

The Registered Office of the Company is located at ''SCOPE Complex'' where all civil, electrical installation & maintenance is carried out by SCOPE. Due to effective monitoring, controlling & scheduling the operation of Chilling units, Elevators & by putting energy efficient equipment, replacement of conventional light fittings, CFL, etc. with LED light fittings and maintain power factor to nearest to unity, SCOPE has saved around 5.24 Lakh Units consumption, resulting in saving of Rs. 57 Lakh in terms of amounts during the financial year 2015-16.

Further, as a result of replacement of conventional light fittings with energy efficient LED lights in Corporate Office at SCOPE Complex, REC has saved around 82,135 units of electricity resulting in saving of Rs. 6,80,186/- during the year.

20.2 Foreign Exchange Earnings & Outgo

No foreign exchange was earned during the financial year 2015-16. However, the foreign exchange outflow aggregating to Rs. 661.03 crore was made during the financial year on account of interest, finance charges and other expenses.

21. SUBSIDIARY COMPANIES

Your Company has two Wholly Owned Subsidiaries (WOS), to focus on additional business of consultancy in the areas of distribution, transmission etc.:

(i) REC Power Distribution Company Limited (RECPDCL) (CIN: U40101DL2007GOI165779)

(ii) REC Transmission Projects Company Limited (RECTPCL) (CIN: U40101DL2007GOI157558)

Further, Ministry of Power, Government of India, allocates independent transmission projects from time to time to RECTPCL to work as Bid Process Coordinator (BPC),for selection of developer as Transmission Service Provider (TSP) through Tariff Based Competitive Bidding Process. In order to initiate development of each independent inter-state transmission project allocated by Ministry of Power, Government of India, RECTPCL incorporates a project specific Special Purpose Vehicle (SPV) as Wholly Owned Subsidiary Company and after the selection of successful bidder through Tariff Based Competitive Bidding Process notified for transmission projects, the respective project specific SPV along with all its assets and liabilities is transferred to the successful bidder. As on March 31, 2016, following project specific Special Purpose Vehicles (SPVs) existed as Wholly Owned Subsidiary Companies of RECTPCL:

1. Nellore Transmission Limited (NTL) (CIN: U40104DL2012GOI245654)*

2. Baira Siul Sarna Transmission Limited (BSSTL) (CIN: U40106DL2013GOI247564)*

3. NRSS XXXVI Transmission Limited (CIN: U40300DL2015GOI284168)

4. North Karanpura Transco Limited (NKTL) (CIN: U40103DL2015GOI287880)

5. Khargone Transmission Limited (KTL)(CIN: U40300DL2015GOI287933)

6. Dinchang Transmission Limited (DTL)(CIN: U40300DL2015GOI288066)

7. NER II Transmission Limited (NTL) (CIN: U40106DL2015GOI279300)

* Office of Registrar of Companies (RoC), NCT of Delhi and Haryana has approved the applications for striking off the name of Nellore Transmission Limited and Baira Siul Sarna Transmission Limited from the Register of Companies u/s 560 of Companies Act, 1956 and both the companies have been dissolved. Further, RoC has issued certificate dated May 25, 2016 for Nellore Transmission Limited and certificate dated July 16, 2016 for Baira Siul Sarna Transmission Limited in respect of dissolution.

Further, Transmission System for LTA of 400MW for 2x500MW Neyveli Lignite Corporation Limited. TS-I (Replacement) (NNTPS) in Neyveli, which was notified vide Gazette Notification dated July 9, 2014 has been denotified vide Gazette Notification dated July 24, 2015, considering the small size of project.

21.1 REC Power Distribution Company Limited

During the financial year 2015-16, RECPDCL has not only excelled in its core business viz. Preparation of Detailed Project Reports (DPR''s), Third Party Inspections (TPI), Material Inspection & Project Management Consultancy (PMC) services, but also set its quality benchmark in the area of Project Implementation under R-APDRP Part-A and execution of turnkey works relating to the construction of toilets (using conventional and prefab technologies) in schools across India under CSR initiatives of REC under Swachh Vidyalaya Abhiyan. Work executed by RECPDCL has been widely appreciated at various platforms in general and our valued customers in particular.

The major assignments undertaken during the financial year 2015-16 are as follows:-

1) IT Implementation works under R-APDRP Part-A for Goa Electricity Department

RECPDCL has excelled in IT Implementation Works under R-APDRP Part-A for Goa Electricity Department (GED) and has set a benchmark of roll-out of Pilot town within a shortest record period of one year.

RECPDCL has procured various hardware/software/services e.g. Servers, Storage subsystem, UPS, Desktops, Printers, DGPS survey, GIS software, Network Analysis Module etc. after following due e-tendering process and reverse auction to maintain better transparency and higher quality standard.

The work executed till March 31, 2016 includes Preparation of Base-line Data System for the project area covering Consumer Indexing (in Panjim & Marmagoan town), GIS Mapping, installation of Automatic Meter Reading (AMR) on Distribution Transformers and Feeders, set-up of Data centre & Data Recovery Centre with all IT equipments viz. Servers, Storage, Critical UPS, etc., set-up of IT equipments at Sub-Divisional Offices & Other Offices of Panjim, Mapusa & Marmagaon town.

2) Preparation of Detailed Project Report and working as Project Monitoring Agency under DDUGJY and IPDS

RECPDCL is engaged in preparation of Detailed Project Report (DPR) and Project Management Agency (PMA) under DDUGJY and IPDS schemes for various DISCOMs namely:

Paschimanchal Vidyut Vitaran Nigam Limited (PVVNL); Dakshinanchal Vidyut Vitaran Nigam Limited (DVVNL); Madhya Pradesh Madhya Kshetra Vidyut Vitaran Company Limited (MPMKVVCL); West Bengal State Electricity Distribution Company Limited (WBSEDCL); Assam Power Distribution Company Limited (APDCL); Manipur State Power Distribution Company Limited (MSPDCL); Chhattisgarh State Power Distribution Company Limited (CSPDCL); Bangalore Electric Supply Company Limited (BESCL); Hubli Electric Supply Company Limited (HESCL); Chamundeshwari Electricity Supply Company Limited (CESCOM); Gulbarga Electricity Supply Company Limited (GESCOM); Mangalore Electricity Supply Company Limited (MESCL); & The Hukkeri Rural Electric Co-operative Society Limited (HRECS).

3) New Initiatives & Assignment ahead

RECPDCL is looking forward to get more diversified business opportunities. The opportunities under consideration are as follows:

a. The process of Empanelment of different agencies to carry out LED based lighting, Energy Efficiency projects and Solar PV (Off Grid/Grid connected) projects etc. across the country is under progress.

b. Project Management Consultancy (PMC) under DDUGJY for J&K Electricity Department.

c. Future business endeavours: RECPDCL is planning & focusing in various new high end technologies consultancy and implementation business viz. Smart Grid and Mini Grid implementation, etc.

Besides achieving the excellent performance in the conventional areas of business since its incorporation in the year 2007, during the financial year 2015-16, RECPDCL has also been successful in getting business in other segments like – (i) Renewable Energy (Solar Projects) in Assam; (ii) Energy Efficiency Projects; and (iii) Monitoring the progress of work of Electrification of un-electrified villages.

(i) Renewable Energy /SPV Project

To promote the utilization of renewable energy to save environment, RECPDCL has participated actively in Roof Top Solar projects. The Company has already completed survey and DPR preparation for 145 remote villages in jurisdiction of Assam Power Distribution Company Limited (APDCL) in Assam State.

(ii) Odisha Solar Project

Contract Award was placed on M/s Punam Energy Private Limited, Kolkata. Survey of all awarded 16 schools was completed. Contractor has submitted Drawings, Time schedule Plan, Bill of material. Ordering of all solar items & equipment for 16 project sites is in process.

(iii) Fund Management

RECPDCL has expanded its portfolio of services further and has added a new business vertical of Fund Management to its existing segments. RECPDCL is currently working as the Lead implementing agency for managing Bureau of Energy Efficiency''s (BEE) Partial Risk Guarantee Fund for Energy Efficiency. The agreement has been signed with BEE on July 16, 2015.

Further, with increasing presence of RECPDCL in the field of Energy Efficiency it is also now empanelled with BEE as an Energy Service Company (ESCO) with a vision to further actively participate in the Energy efficiency market.

(iv) Monitoring of Electrification of Un-Electrified Villages (UEV)

Ministry of Power (MoP) has decided to take Electrification of all 18,452 Un-Electrified (UE) villages on Mission Mode and set target of Electrification of Un-electrified villages by March, 2017. MoP has appointed REC as Nodal Agency to monitor the progress of Electrification work of UE villages and further REC has awarded the work relating to day to day monitoring, website maintenance & updation, to develop RE mobile application (GARV App), control room-setup, call center and quality surveillance checks during Electrification of UE villages, etc., to its Wholly Owned Subsidiary Company i.e. RECPDCL.

For monitoring the progress of Electrification work of UE villages in an effective and speedy manner, RECPDCL has deputed 415 engineers in field as "Gram Vidyut Abhiyantas" (GVAs) at Blocks/Districts level in different state across the country and 75 engineers as "District Vidyut Abhiyantas" (DVAs) posted in all districts of Uttar Pradesh to look after progress of work in their respective districts. RECPDCL has also developed a Web-Portal and a Mobile Application viz. "Grameen Vidyutikaran-GARV" to closely monitor the real time progress of Electrification work of UE villages.

Tablets with latest and upgraded technology have been provided to all the GVAs to complete the assignment efficiently & in a time bound manner as well as to capture the real time Pictures & Videos in the GARV app so that the progress can be monitored by everyone across the country.

The captured pictures and videos by GVAs are being published in the GARV App after going through a multi-stage scrutiny & approval at Project Office and Head Office level. The village is being declared electrified on GARV App only when it is declared electrified by DISCOMs and further checked & found electrified by GVAs.

During the financial year 2015-16, REC has achieved the target of Electrification of 7,108 UE villages against the internal target of Electrification of 7,000 UE villages. Further, as on August 11, 2016, 10,006 villages have been electrified. The brief details are mentioned below:

Sl. No. Total UE Villages Elect rified Unin habited To be Electr ified Total Village Visited Total Visits by GVAs

1 18,452 10,006 525 7,921 16,597 46,401

Swachh Vidyalaya Abhiyan (SVA)

REC Power Distribution Company Limited (RECPDCL) (Wholly-Owned Subsidiary of REC) was appointed as Project Implementing & Monitoring Agency for monitoring of work relating to construction of 7,096 Nos. of toilets in schools in 26 districts of Bihar, Rajasthan, Madhya Pradesh, Uttar Pradesh, Telangana and Punjab states under ''Swachh Vidyalaya Abhiyan'' (SVA) in response to Prime Minister''s call to the nation. All the toilets were constructed & successfully handed over to the respective school authorities within the stipulated time period. The estimated construction cost of 7,096 Nos. of toilets is around Rs. 110 crore.

SKOCH Smart Technology Award 2015

In recognition of its excellent work done for achieving the target of construction of toilets under ''Swachh Vidyalaya Abhiyan'' (SVA), RECPDCL has received appreciation from Ministry of Power (MoP) and also was conferred with the ''SKOCH Smart Technology Award 2015'' for the Swachh Vidalaya, Swachh Bharat& UE Mission at the SKOCH Smart Technology Award 2015 Ceremony held on December 11, 2015 at New Delhi. Due to the excellent work carried out by RECPDCL even in some of the most disturbed areas, RECPDCL has been further awarded the work for construction of toilets in Gazipur district of the State of Uttar Pradesh.

Information Technology Initiatives

As an Information Technology initiative, an internal portal has been created for online storage of the data/reports related to the Swachh Vidyalaya Abhiyan project and monitoring of milestone wise payment to the contractors against the construction of toilets in different states. RECPDCL has also implemented the backup policy for maintaining the regular back up of important data to various storage disks at different locations in order to minimize the risks.

OHSAS 18001:2007 Certification

Apart from ISO 9001:2008 and ISO 14001:2004, RECPDCL has also been conferred with OHSAS 18001:2007 during the financial year 2015-16 for implementation of Occupational Health and Safety Assessment System for carrying out administrative and other allied activities at Corporate Office, Delhi.

MoU RATING

The performance of RECPDCL in terms of MoU signed with the holding company i.e. Rural Electrification Corporation Limited for the financial year 2013-14 had been rated as "Excellent" by the Department of Public Enterprises (DPE), Government of India. For the financial year 2014-15 and 2015-16 also the Company is poised to receive "Excellent" rating.

Financial Performance of RECPDCL

The Financial Performance of the company is on the fast trajectory growth path. During the financial year 2015-16, the company''s total revenue has increased by 73% to Rs. 151.54 crore as compared to Rs. 87.79 crore in the previous year. The Profit Before Tax (PBT) has increased by 6% to Rs. 55.44 crore as compared to Rs. 52.52 crore in the previous year. Further, the Profit After Tax (PAT) has also increased by 4% to Rs. 36.17 crore from Rs. 34.77 crore during the previous year. The Board of Directors of RECPDCL has recommended a dividend of Rs. 2,170.56 (Rupees Two Thousand One Hundred Seventy and Fifty Six Paisa) per equity share (on the face value of Rs. 10/- each) representing 21,705.60% of the Paid up Share Capital of the Company for the financial year 2015-16, subject to the approval of Shareholders of the company in the 9th Annual General Meeting, as against Rs. 100/- (Rupees One Hundred) per share, representing 1,000% of the Paid up Share Capital of the Company in the previous year. The total dividend pay-out for the financial year 2015-16 will amount to Rs. 10.85 crore (excluding dividend distribution tax).

21.2 REC Transmission Projects Company Limited (RECTPCL)

During the financial year 2015-16, the Ministry of Power, Government of India vide Gazette Notification dated July 24, 2015 and November 17, 2015, has allocated following five inter-State transmission systems with aggregate estimated cost of Rs. 4,700 crore to RECTPCL to act as the Bid Process Coordinator for selection of developer for:

I. System Strengthening Scheme in Northern Region (NRSS-XXXVI) along with LILO of Sikar-Neemrana 400kV D/C Line at Babai (RRVPNL).

II. Immediate evacuation for North Karanpura (3x660 MW) generation project of NTPC and Creation of 400/220 kV Sub-station at Dhanbad -Proposal of JUSNL (ERSS-XIX).

III. Transmission system Strengthening in WR associated with Khargone TPP (1320 MW).

IV. Transmission system for Phase-I Generation Projects in Arunachal Pradesh.

V. NER System Strengthening Scheme-II (Part- B) & V.

Further, for each of the transmission project, a two stage Bidding process featuring separate Request for Qualification (RfQ) and Request for Proposal (RfP) is adopted in accordance with Tariff Based Competitive Bidding guidelines of Ministry of Power, Government of India for selection of developer as Transmission Service Provider. After the selection of successful bidder, the respective project specific SPV along with all its assets and liabilities is transferred to the successful bidder.

For the transmission projects listed at Sl. No. I to IV above, RECTPCL incorporated project specific SPVs by the name of NRSS XXXVI Transmission Limited on August 18, 2015,North Karanpura Transco Limited on November 27, 2015, Khargone Transmission Limited on November 28, 2015 and Dinchang Transmission Limited on December 2, 2015.

For transmission project listed at Sl. No. V, CEA had initially notified RECTPCL to be the Bid Process Coordinator for "NER System Strengthening Scheme II" vide gazette notification dated February 9, 2015. Accordingly, SPV was incorporated by the name of NER II Transmission Limited on April 21, 2015. Subsequently, Empowered Committee in its meeting held on September 14, 2015 revised the scope of project and proposed to merge with another transmission project and named the scheme as NER System Strengthening Scheme-II(Part-B) & V. The revised scheme has also been allocated by the Ministry of Power, Government of India vide Gazette Notification dated November 17, 2015.

During the current financial year, RECTPCL has been engaged to prepare Detailed Project Report and to act as Project Management Agency (PMA)in respect of Integrated Power Development Scheme by Kanpur Electricity Supply Company Limited (KESCO).

During the financial year ended March 31, 2016, RECTPCL has generated an income of Rs. 44.15 crore. The Profit Before Tax and Profit After Tax for the year is Rs. 42.42 crore and Rs. 28.80 crore respectively. The Net Worth of RECTPCL is Rs. 123.41 crore against initial Capital injected by REC of Rs. 0.05 crore in year 2007. For the financial year 2015-16, the Board of Directors of RECTPCL has recommended a dividend of Rs. 1730 per equity share of face value of Rs. 10/-each i.e. 17,300% on the paid up share capital of the company, amounting to Rs. 8.65 crore, subject to approval of shareholders of the Company in the Annual General Meeting.

22. DETAILS OF JOINT VENTURE AND ASSOCIATE COMPANY

REC, along with three other PSUs, namely Power Grid Corporation of India Limited, NTPC and PFC as partners, has formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL) on December 10, 2009. The Company has contributed Rs. 47.50 crore (being 28.8% of paid-up capital of EESL) upto March 31, 2016. Further, during the financial year 2016-17, the Equity investment of REC in EESL was increased to 14,65,00,000 Equity Shares of Rs. 10/- each w.e.f April 25, 2016. Accordingly, as on date REC holds 31.7% of the paid up equity share capital of EESL.

EESL is formed to create & sustain market access of energy efficient technologies particularly in the public facilities like municipalities, buildings, agriculture, industry etc. and to implement several schemes of Bureau of Energy Efficiency, Ministry of Power, Government of India. EESL is also leading the market related activities of the National Mission for Enhanced Energy Efficiency (NMEEE), one of the 8 national missions under National Action Plan on Climate Change. The Business verticals of the company inter-alia include implementing projects in Energy Service Company (ESCO) mode in Agriculture Demand Side Management (AgDSM), Municipal Demand Side Management (MuDSM), Distribution Energy Efficiency projects, Building, Small & Medium Enterprises (SMEs), Perform, Achieve and Trade-Joint Implementation Plan (PAT-JIP), Corporate Social Responsibility activities, etc.

Currently, EESL is implementing Municipal Street Lighting projects with various Municipal Corporation and AgDSM projects for replacement of inefficient Agricultural Pump sets in agriculture sector, Unnat Jyoti by Affordable LEDs for all formely Domestic Efficient Lighting Programme (DELP) in domestic residential sector in ESCO mode with various Utilities and CSR projects of various companies.

The performance of EESL during the year has improved and the financial performance of the company is on the growth path. During the financial year 2015-16, based on the unaudited financials, the company''s total revenue is Rs. 714.40 crore compared to the previous year revenue of Rs. 71.11 crore. The Profit Before Tax (PBT) is Rs. 49.60 crore as compared to Rs. 13.57 crore in the previous year. Further, the Profit After Tax (PAT) has also increased to Rs. 32.89 crore fromRs. 9.06 crore during the previous year.

23. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129 of the Companies Act, 2013 and Accounting Standard-21, the Company has prepared Consolidated Financial Statements including that of its Subsidiary Companies i.e RECTPCL & RECPDCL and Joint Venture Company i.e EESL, which shall be laid before the ensuing 47th Annual General Meeting along with the Standalone Financial Statements of the Company. However, those wholly owned subsidiary companies which are incorporated by RECTPCL & are subsidiary of REC in terms of provisions of Section 2(87) of Companies Act, 2013, for the purpose of subsequent disposal have not been consolidated in the financial statements of the Company.

Pursuant to sub-section (3) of Section 129 of the Act, a statement containing the salient features of the financial statements of subsidiaries and joint venture in Form AOC-1 forms part of this Annual Report.

The Audited Financial Statements including the consolidated financial statements and audited accounts of subsidiaries of the Company are available on the website of the Company at www.recindia.com. Further, these documents will be kept for inspection by any member or trustee of the holder of any debentures at the Registered Office of the Company. The Company will also make available copy thereof upon specific request by any member of the Company interested in obtaining the same.

24. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Being a Government Company, the power of appointment of Directors on the Board of the Company is vested with the President of India acting through the Ministry of Power (MoP), Government of India. The remuneration of Directors and employees of the Company is fixed as per extant Guidelines issued by Department of Public Enterprises (DPE), from time to time. Further, the Part Time Non Official Independent Directors are paid sitting fees, as decided by the Board of Directors from time to time (within the limits prescribed under the Companies Act, 2013) for attending Board and Committee meetings. As per the norms of Government of India, the Government Nominee Director is not entitled to receive any remuneration/ sitting fee from the Company. The details of remuneration/sitting fees paid to Directors are given in Corporate Governance Report annexed to this report.

Further, Ministry of Corporate Affairs (MCA) vide Notification dated June 5, 2015, has exempted Government Companies from the requirements related to criteria formulation for determining qualifications, positive attributes and independence of Directors and policy relating to remuneration of Directors.

As per the provisions of the Companies Act, 2013, the Board of Directors of the Company has designated the Chairman and Managing Director (CMD), Director (Finance), Director (Technical) and Company Secretary as Key Managerial Personnel (KMPs) of the Company. The role of CEO is being performed by the CMD and the role of CFO is being performed by Director (Finance) of the Company.

During the financial year 2015-16, Dr. Arun Kumar Verma (DIN: 02190047) was appointed as Government Nominee Director vice Shri Badri Narain Sharma vide MoP Order dated October 6, 2015. Since, Dr. Verma is a Director nominated by Central Government by virtue of its shareholding in the Company, approval of shareholders in the AGM for his appointment as Director, is not required in line with the provisions of Section 161 (3) of the Companies Act, 2013.

Consequent to the resignation by Shri Prakash Thakkar (DIN: 01120152), he ceased to be a Director on the Board of the Company w.e.f October 12, 2015 and MoP vide its order dated October 16, 2015 has appointed Shri Sanjeev Kumar Gupta (DIN: 03464342) as Director (Technical) for a period of five years from the date of assumption of charge i.e. October 16, 2015 or till superannuation or until further orders whichever is earlier. Also, MoP vide Order dated November 13, 2015 has appointed three Part time Non- Official Independent Directors namely Shri Arun Singh (DIN: 00891728), Shri Aravamudan Krishna Kumar (DIN: 00871792) and Prof. T.T. Ram Mohan (DIN: 00008651) on the Board of Directors of the Company for a period of 3 years from the date of notification of their appointment or till further orders whichever is earlier. Further, Director (Technical) and the Independent Directors, are proposed to be appointed by the shareholders of the Company, in the ensuing AGM.

As per the provisions of the Companies Act, 2013 and in terms of provisions of Article 82 (4) of Articles of Association of the Company, Shri Ajeet Kumar Agarwal (DIN: 02231613), shall retire by rotation at the 47th Annual General Meeting and being eligible, offers himself for re-appointment. The Board of Directors recommends his reappointment as a Director till the completion of his present tenure or until further orders, whichever is earlier.

The brief resume of Directors proposed for appointment/re-appointment is annexed to the Notice of the AGM.

25. EVALUATION OF BOARD OF DIRECTORS/INDEPENDENT DIRECTORS

As per the statutory provisions, a listed company is required to disclose in it''s Board''s Report, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance, that of its Committees and individual directors and the criteria for performance evaluation of Independent Directors, as laid down by Nomination and Remuneration Committee, is also required to be disclosed in the Annual Report.

However, Ministry of Corporate Affairs vide its notification dated June 5, 2015 has exempted certain provisions of Companies Act, 2013 for Government Companies. As per the above notification, the Nomination & Remuneration Committee is not required to formulate the criteria for appointment of Directors, their remuneration policy and carrying out their performance evaluation in certain cases. Further, the Board of Government Companies is not required to evaluate performance of directors in case they are evaluated by administrative ministry.

REC being a government company, the evaluation of performance of all the members of the Board including Independent Directors is undertaken by administrative ministry i.e. Ministry of Power, Government of India.

26. MoU RATING AND AWARDS

The performance of your Company in terms of MoU signed with the Ministry of Power, Government of India for the financial year 2014-15 has been rated as "Excellent". This is the 22nd year in succession that REC has received "Excellent" rating since the year 1993-94 when the first MoU was signed with the Government. For the financial year 2015-16 also, the Company is poised to receive "Excellent" rating. During the year, your Company received "Fastest Growing Navratna PSU'' award from India Today and CMD of your Company also received "Best CEO Award" in the category of Best CEO Award instituted by Business Today.

27. BOARD & COMMITTEES OF THE BOARD

The details of the composition, terms of reference and number of meetings of the Board and its Committees held during the financial year 2015-16 are provided in the Corporate Governance Report annexed to this Report.

28. DIRECTORS'' RESPONSIBILITY STATEMENT

With reference to Section 134(5) of the Companies Act, 2013, it is confirmed that:

(i) in the preparation of the annual accounts for the year ended March 31, 2016, the applicable Accounting Standards have been followed and no material departures have been made from the same;

(ii) such accounting policies have been selected and applied consistently (except for changes in Accounting Policies as disclosed in the Notes to Accounts to the Financial Statements) and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for that period;

(iii) proper and sufficient care is taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the annual accounts have been prepared on a going concern basis;

(v) Internal financial controls have been laid to be followed by the Company and such internal financial controls were adequate and operating effectively; and

(vi) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

29. "THINK GREEN, GO GREEN" INITIATIVE

The Companies Act, 2013 permits companies to send documents like Notice of Annual General Meeting, Annual Report and other documents through electronic means to its members at their registered email addresses, besides sending the same in physical form.

As a responsible Corporate Citizen, the Company has actively supported the implementation of ''Green Initiative'' of Ministry of Corporate Affairs (MCA) and effected electronic delivery of Notices and Annual Reports since 2010-11 to those shareholders whose email ids were already registered with the respective Depository Participants (DPs) and who have not opted for receiving such documents in physical form. The intimation of dividends (interim/final) is also being sent electronically to those shareholders whose email ids are registered.

Members, who have not registered their e-mail addresses so far, are requested to register their e-mail address with the Registrar and Share Transfer Agent (R&TA) of the Company / Depository Participant (DP) of respective member and take part in the Green Initiative of the Company, for receiving electronic communications and support the "THINK GREEN, GO GREEN" initiative.

It is reiterated that upon receipt of requisition from the member including the members who have exercised the option of electronic delivery of these documents, every member of the Company is entitled to receive free of cost, a copy of the Balance Sheet of the Company and all other documents required by law to be attached thereto, including the Statement of Profit and Loss and Auditors'' Report, etc.

Further, pursuant to Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, the Company is providing e-voting facility to all members to enable them to cast their votes electronically in respect of resolutions set forth in the Notice of Annual General Meeting (AGM). The detailed instructions for e-voting are provided in the Notice of AGM.

30. SWACHH BHARAT ABHIYAN

As per directions of Ministry of Power, Government of India, REC has organized various cleanliness programmes i.e. "Swachhta Abhiyan" (National Cleanliness Campaign) from September 25, 2015 to October 11, 2015 and "Swachh Bharat Abhiyan" from June 22, 2015 to June 26, 2015 at SCOPE and all other Offices of the Company. During the cleanliness programs, banners & posters were fixed in and around Office premises to spread awareness among employees and general public. All employees of REC participated with great enthusiasm and zeal & undertook special cleanliness drive of their respective Office premises, toilets, stairs, lifts & other surrounding areas. Old and unwanted records have been weeded out as per Record Retention Schedule. In this process aprox. 5,000 kg waste Official papers, magazines, periodicals, draft reports etc. were disposed off. Printing of logo of "Swachh Bharat Mission" on all file covers, envelops and letter heads of the Company still continues in REC for creating awareness about cleanliness.Cleanliness is continuous process and it will continue in REC.

31. RIGHT TO INFORMATION ACT, 2005

Your Company has taken necessary steps for the Implementation of "Right to Information Act, 2005 (RTI)" in the Company and independent RTI Cell has been set up for coordinating the work relating to receipt of applications and furnishing information thereto. RTI Handbook, both in English and Hindi, has been placed on REC website which is updated periodically.

The status of RTI applications and appeals during the financial year 2015-16 is as follows:

Sl. No. Particulars Nos.

1. Applications received (upto March 31, 2016) 345

2. Applications disposed off (upto March 31, 2016) 322

3. Applications disposed off subsequently 23

4. Appeals received by First Appellate Authority, REC 25

5. Appeals disposed off by First Appellate Authority, REC 25

6. Second Appeal notice received from Central Information Commission (CIC) 5

7. Second Appeal disposed off by Central Information Commission (CIC) 5

32. ESTABLISHMENT OF VIGIL MECHANISM

REC has adopted "Public Interest Disclosure and Protection of Informers" (PIDPI) Resolution as issued by Central Vigilance Commission vide Office Order No.33/5/2004 dated May 17, 2004 and the same has also been incorporated in the "Vigilance Hand Book" issued by Vigilance Division. REC has also adopted a separate ''Whistle Blower Policy'' as per directives of SEBI and provisions of Companies Act, 2013.

33. REPORTING UNDER PUBLIC PROCUREMENT POLICY FOR MICRO & SMALL ENTERPRISES (MSEs) ORDER, 2012

To encourage participation of Micro, Small and Medium Enterprises (MSMEs) all the directives mentioned in the public procurement policy order, 2012 have been included in REC procurement guidelines including MSEs owned by SC/ST and it has also been uploaded on REC''s website, at the link: http://www.recindia.nic.in/images/pdf-fi les/Public Procurement Policy.pdf

REC being financial institution is not executing any project. Hence, only petty purchase i.e. stationery and Office equipment from small vendors are being made. However, no target has been fixed for financial year 2016-17 to this effect.

34. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

In line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013, an ''Internal Complaints Committee'' has been constituted in the Company for redressal of complaint(s) against sexual harassment of women employees. The committee is headed by a senior woman Official of the Company and includes a representative from an NGO as one of its members. Anti-sexual harassment stance of the Company is also outlined in REC (Conduct, Discipline and Appeal) Rules.

During the financial year 2015-16, the Company did not receive any complaint of sexual harassment.

35. EXTRACT OF ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in Form MGT - 9, is annexed to this Report.

36. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contract or arrangement entered into by the Company with related parties as per the provisions of the Companies Act, 2013 are disclosed in Form AOC-2, is annexed to this Report.

37. AUDITORS STATUTORY AUDITORS

M/s Raj Har Gopal & Co., Chartered Accountants (Firm Reg No.: 002074N), New Delhi and M/s A.R. & Co., Chartered Accountants (Firm Reg No.: 002744C), New Delhi were appointed as Statutory Auditors of your Company for the financial year 2015-16 by the Comptroller and Auditor General (C&AG) of India. The Statutory Auditors have audited the Financial Statements of the Company for the financial year ended March 31, 2016.

Further, the Comptroller and Auditor General (C&AG) of India, in exercise of powers conferred under Section 139 of the Companies Act, 2013 has appointed M/s. Raj Har Gopal & Co., Chartered Accountants (Firm Reg. No.: 002074N), New Delhi and M/s. A. R. & Co., Chartered Accountants (Firm Reg. No.: 002744C), New Delhi, as the Statutory Auditors of the Company for the financial year 2016-17 and the Statutory Auditors have also accepted their appointment. Approval of the Members of the Company will be obtained in the ensuing Annual General Meeting, to authorize the Board of Directors of the Company, to fix the remuneration of Auditors for the financial year 2016-17.

SECRETARIAL AUDITORS

M/s Chandrasekaran Associates, Practicing Company Secretaries (Certificate of Practice No. 5673), New Delhi were appointed as Secretarial Auditors of the Company for carrying out Secretarial Audit for the financial year 2015-16. In terms of Section 204 of the Companies Act, 2013 and Rules made thereunder, they have issued Secretarial Audit Report for the financial year 2015-16 and the same is annexed to this Report.

37.1 Management''s Comments on the Auditors'' Report

Though, auditors have not given any qualifications, reservations, adverse remarks or disclaimers in their report on standalone and consolidated financial statements of the Company but have made certain observations on further strengthening of the internal financial controls. Accordingly, the auditor observations and Management Reply to the observations are submitted as under:

38. COMMENTS OF C&AG OF INDIA

The Comptroller and Auditor General (C&AG) of India, through letters dated July 22, 2016 has given ''NIL'' Comments on the Standalone & Consolidated Audited Financial Statements of the Company for the year ended March 31, 2016 under Section 143 (6) (a) of the Companies Act, 2013. The Comments of C&AG for the financial year 2015-16 have been placed along with the report of Statutory Auditors of the Company elsewhere in this Annual Report.

39. DEBENTURE TRUSTEES

In compliance to the requirements of SEBI (LODR) Regulations, 2015, the details of Debenture Trustees appointed by the Company, for different series of Bonds issued by the Company, from time to time, is annexed to this report.

40. STATUTORY DISCLOSURES

a) There was no change in the nature of business of the Company during the financial year 2015-16.

b) The Company has not accepted any public deposits during the financial year 2015-16.

c) No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

d) The Company maintains an adequate system of Internal Controls including suitable monitoring procedures, which ensure accurate and timely financial reporting of various transactions, efficiency of operations and compliance with statutory laws, regulations and Company policies. For details, please refer to the ''Management Discussion and Analysis'' annexed to this report.

e) Pursuant to Section 186(11) of the Companies Act, 2013 loans made, guarantees given or securities provided by a company engaged in the business of financing of companies or of providing infrastructural facilities in the ordinary course of its business are not applicable to the Company, hence no disclosure is required to be made. Further, the details of investments are given at Note No. 10 of Notes to Accounts to Standalone Financial Statements.

f) Since the provisions of Section 197 of the Companies Act, 2013 and Rules made thereunder are not applicable to Government Companies, no disclosure is required to be made.

g) There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year i.e. March 31, 2016 and the date of this report.

h) The Company has not issued any stock options to the Directors'' or any employee of the Company.

41. STATUS OF CONSTRUCTION OF REC CORPORATE OFFICE BUILDING AT GURGAON

The work of construction of state of art Office building at City Centre, Sector-29, Gurgaon was started in April 2015. The proposed building is GRIHA 5 Star Net Positive building having special features like fair finish concrete surfaces, raised flooring, radiant cooling for slabs to reduce power consumption of air conditioning, Integrated Building Management System (IBMS), sensor controlled lighting, Bio-climatic façade with motorized blinds, solar Photo Voltaic at roof top pergola, auditorium and other latest technological features.

M/s Chelsea West Architect, New York (USA) selected through Global Architectural Design Competition is the Architect of the building. M/s Telecommunications Consultants India Limited (A Government of India Enterprise) is Project Management Consultant of the project and M/s JMC Project (India) Limited is the contractor for the project. Presently 8 consultants/sub consultants apart from 11 vendors of international repute are working on the project. Giving utmost importance to the project, REC has appointed Indian Institute of Technology, Delhi for vetting of the structural design of the building.

Till July 31, 2016, RCC work in Basement – two & three, has been completed. RCC work for basement one is in progress and service work in basement three has also taken up. The project is scheduled to be completed in year 2018.

42. STATUTORY AND OTHER INFORMATION REQUIREMENTS

Information required to be furnished as per the Companies Act, 2013 and revised listing agreements executed with Stock Exchanges in terms of SEBI (LODR) Regulations, 2015 and other applicable statutory provisions is annexed to this report as under:

Particulars Annexure

Management Discussion & Analysis Report I

Report on Corporate Governance II

Auditors'' Certificate on Corporate Governance III

Business Responsibility Report IV

Secretarial Audit Report issued by the Secretarial Auditors of the Company V

Annual Report on CSR activities VI

Extract of Annual Return VII

Particulars of Contracts or Arrangements with Related Parties VIII

Details of Debenture Trustees appointed by the Company for different series of Bonds IX

43. ACKNOWLEDGEMENTS

The Directors are grateful to the Government of India particularly the Ministry of Power, Ministry of Finance and Ministry of Human Resource Development, the NITI Aayog and the Reserve Bank of India for their continued co-operation, support and guidance in effective management of the Company''s affairs and resources.

The Directors thank the State Governments, State Electricity Boards, State Power Utilities and other Borrowers for their continued support and trust in the Company.

The Directors also place on record their sincere appreciation for the continued support and goodwill of the esteemed Shareholders, Investors in REC Bonds, domestic and overseas Banks, Life Insurance Corporation of India, KfW of Germany and JICA of Japan in the fund raising programmes of the Company.

The Directors also thank M/s Raj Har Gopal & Co. and M/s A.R & Co., Statutory Auditors, M/s Chandrasekaran Associates, Secretarial Auditors and the Comptroller & Auditor General of India for their valued contribution.

The Directors also sincerely appreciate and thank all the employees of the Company for their valuable contribution and dedicated efforts in steering the Company to excellent performance for yet another year in succession.

For and on behalf of the Board of Directors

(Rajeev Sharma)

Chairman & Managing Director

(DIN 00973413)

Place : New Delhi

Date : August 11, 2016


Mar 31, 2015

To The Shareholders,

The Directors have pleasure in presenting the Forty Sixth Annual Report together with the Audited Financial Statements of your Company for the financial year ended March 31, 2015.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the financial year 2014-15 were as under with comparative position of previous year''s performance :

(Rs. in crore)

Parameter FY 2014-15 FY 2013-14

Loans Sanctioned (excluding sanctions under DDUGJY-RE and DDG) 61,421.37 70,739.48

Disbursements (including subsidy under DDUGJY-RE and DDG) 46,446.82 37,969.99

Recoveries (including interest) 32,005.56 30,755.36

Total Operating Income 20,229.53 17,017.98

Profit Before Tax 7,427.04 6,531.12

Profit After Tax 5,259.87 4,683.70

1.2 Financial Performance

The total operating income of your Company for the financial year 2014-15 increased by 19% to Rs. 20,229.53 crore from Rs. 17,017.98 crore during the previous year. The profit after tax increased by 12% to Rs. 5,259.87 crore from Rs. 4,683.70 crore in the previous year.

Loan asset book of your Company as on March 31, 2015 has increased by a healthy 21% to reach a historic high of Rs. 1,79,647 crore from Rs. 1,48,641 crore in the previous year. The outstanding borrowings as on March 31, 2015 were Rs. 1,51,024 crore.

Earnings Per Share (EPS) for the financial year ended March 31, 2015 was Rs. 53.27 of Rs. 10/- each as against Rs. 47.43 in the previous year. Net worth of the Company as on March 31, 2015 has increased by 20% to Rs. 24,857 crore from Rs. 20,669 crore in the previous year.

1.3 Dividend

In addition to an interim dividend of Rs. 8.00 (Rupees Eight only) per share paid on February 27, 2015, the Board of Directors of your Company has recommended a final dividend of Rs. 2.70 (Rupees Two and Seventy paisa only) per share (on the face value of Rs. 10/- each) for the financial year 2014-15, which is subject to approval of the Shareholders in the 46th Annual General Meeting. Accordingly, the total dividend for the financial year 2014-15 will work out to Rs. 10.70 (Rupees Ten and Seventy Paisa only) per share (on the face value of Rs. 10/- each), representing 107% of the paid-up share capital of the Company, as against Rs. 9.50 (Rupees Nine and Fifty paisa only) per share, representing 95% of the paid-up share capital of the Company, in the previous year. The total dividend pay-out for the financial year 2014-15 will amount to Rs. 1,056.58 crore (excluding dividend distribution tax of Rs. 212.17 crore).

1.4 Share Capital

The issued and paid up share capital of the Company as on March 31, 2015 was Rs. 987.46 crore divided into 98,74,59,000 equity shares of Rs. 10/- each against the Authorized Share Capital of Rs. 1,200 crore divided into 1,20,00,00,000 equity shares of Rs. 10/- each.

The President of India held 65.64% of the paid up equity share capital of the Company as on March 31, 2015. During the financial year 2014-15, there was no change in the shareholding of the Promoter. However, during the financial year 2015-16, the President of India acting through Ministry of Power, Government of India divested/sold 4,93,72,950 equity shares i.e. 5% of total paid up capital of the Company through Offer For Sale (OFS) on April 8, 2015 and further divested/ sold 27,588 equity shares i.e. 0.003% of total paid up capital of the Company through an off-market transaction under Central Public Sector Enterprises Exchange Traded Fund (CPSE ETF) on April 10, 2015. Accordingly, as on date, the President of India holds 60.64% of the paid up equity share capital of the Company.

2. LOANS SANCTIONED

The Company sanctioned loans worth Rs. 61,421.37 crore during the financial year 2014-15, as against Rs. 70,739.48 crore in the previous year, excluding sanctions under Deendayal Upadhyay Gram Jyoti Yojana - RE Component (DDUGJY-RE) and Decentralised Distributed Generation (DDG). The state-wise and category-wise break-up of loans sanctioned during the financial year are given in enclosed Table - 1 and Table - 2 respectively. The cumulative amount of sanctions made since inception upto March 31, 2015 was Rs. 6,16,008.13 crore, including DDUGJY-RE and DDG project cost (capital subsidy and loan) upto XI five year plan. The cumulative state-wise position of sanctions upto the financial year 2014-15 is given in enclosed Table - 3.

3. DISBURSEMENTS

A total sum of Rs. 42,818.46 crore was disbursed during the financial year 2014-15 as againstRs. 35,546.02 crore in the previous year. Further, an amount of Rs. 4,002.73 crore under DDUGJY (including subsidy of Rs. 3,605.72 crore under RE component of DDUGJY and Rs. 22.64 crore under DDG subsidy) has been disbursed The cumulative amount disbursed since inception up to March 31, 2015 was Rs. 2,83,512.55 crore excluding subsidy under DDUGJY-RE and DDG. The state-wise disbursements and repayment of loan by borrowers during the financial year 2014-15 together with cumulative figures and outstanding as on March 31, 2015 are given in enclosed Table - 4.

4. RECOVERIES

4.1 Your Company gives utmost priority to the timely realization of its dues towards principal, interest, etc. The amount due for recovery including interest during the financial year 2014-15 was Rs.32,759.07 crore as compared to Rs. 31,312.57 crore during the previous year. The Company recovered a total sum of Rs. 32,005.56 crore during the financial year 2014-15 as against Rs. 30,755.36 crore during the previous year. The Company achieved recovery rate of 97.70% for the financial year 2014-15. The overdues from defaulting borrowers as on March 31, 2015 were Rs. 1,549.18 crore.

4.2 Your Company''s Non-Performing Assets (NPAs) continue to be at low levels. As on March 31, 2015, the Gross NPAs of the Company was Rs. 1,335.38 crore. The percentage of NPA as a percentage of Gross Loan Assets stood at 0.74% as on March 31, 2015 as compared to 0.33% as on March 31, 2014. The net NPA as on March 31, 2015 was Rs. 969.93 crore, which is 0.54% of Gross Loan Assets.

The details of loans rescheduled during the financial year 2014-15 are as under:

(Rs. in crore)

Particulars FY 2014-15 FY 2013-14

No. of Borrowers 27 18

Standard Loans Rescheduled

Amount Outstanding 35,024.03 32,231.84

The Rescheduled loan amount includes Rs. 10,671.47 crore wherein the first repayment date was extended due to delayed commissioning of the respective project.

There were no loans rescheduled in respect of Sub-standard & doubtful loans during the financial year 2014-15.

5. FINANCIAL REVIEW

5.1 Summary of Financial Results

The summary of audited financial results of the Company for the financial year ended March 31, 2015 is as under:

(Rs. in crore)

Particulars Standalone Consolidated

FY 2014-15 FY 2013-14 FY 2014-15 FY 2013-14

Revenue from Operations 20,229.53 17,017.98 20,383.96 17,122.21

Other Income 158.52 102.82 165.90 106.73

Total Income 20,388.05 17,120.80 20,549.86 17,228.94

Finance Costs 11,844.61 10,038.46 11,839.72 10,034.74

Other Operating Expenses 313.44 239.20 353.33 264.90

Provisions and Contingencies 802.96 312.02 804.47 312.59

Total Expenses 12,961.01 10,589.68 12,997.52 10,612.23

Profit Before Tax 7,427.04 6,531.12 7,552.34 6,616.71

Provision for Taxation 2,167.17 1,847.42 2,207.92 1,875.46

Profit After Tax 5,259.87 4,683.70 5,344.42 4,741.25

Less : Appropriations

Transfer to Special Reserve u/s 36(1) (viii) of the Income 1,629.00 1,291.00 1,629.00 1,291.00 Tax Act, 1961

Transfer to Reserve for Bad & Doubtful Debts u/s 36(1) 353.00 288.00 353.00 288.00 (viia) of the Income Tax Act, 1961

Dividend 1,056.58 938.09 1,056.58 938.09

Dividend Distribution Tax 212.17 159.40 214.21 159.46

Transfer to Debenture Redemption Reserve 185.79 185.79 185.79 185.79

Transfer to General Reserve 526.00 470.00 530.76 490.30

Surplus carried over to Balance Sheet 1,297.33 1,351.42 1,375.08 1,388.61

5.1.1 Contribution to National Exchequer

During the financial year 2014-15, the Company contributed an amount of Rs. 3,134.24 crore as compared to Rs. 2,424.27 crore in the previous year to National Exchequer in the form of payment of Dividend to the Government of India against its shareholding in the Company, Dividend Distribution Tax, Direct Taxes and Service Tax paid including CENVAT credit, as detailed below:

(Rs. in crore)

Particulars FY 2014-15 FY 2013-14

Dividend paid to the Government of India 631.96 610.14

Dividend Distribution Tax* 187.26 155.20

Direct Taxes 2,285.04 1,640.42

Service Tax paid including CENVAT credit 29.98 18.51

Total 3,134.24 2,424.27

Includes Dividend Distribution Tax on final dividend for the previous year and on interim dividend for the current year.

5.1.2 Ratio Analysis

A comparative statement of important ratios of the Company for the financial year 2014-15 vis-à-vis 2013-14, is as under:

Particulars FY 2014-15 FY 2013-14

Earnings Per Share (Rs.) 53.27 47.43

Return on Average Net Worth (%) 23.11 24.57

Book Value per Share (Rs.) 251.73 209.32

Debt Equity Ratio (times) 6.08 6.11

Price Earnings Ratio (times)* 6.25 4.84

Interest Coverage Ratio (times) 1.63 1.65

*PE Ratio has been calculated on the basis of closing price of equity share of REC as on March 31, 2015 and March 31, 2014, respectively at NSE.

5.2 Resource Mobilization

The Company mobilized Rs. 41,189.82 crore from the market during the financial year 2014-15. This includesRs. 5,337.78 crore by way of Capital Gain Tax Exemption Bonds, Rs. 29,200 crore by way of non-priority sector bonds, Rs. 6,409.03 crore (i.e USD 1,050 million) from External Commercial Borrowings (ECB) and Rs. 243.01 crore by way of Official Development Assistance (ODA) loan from Kreditanstalt für Wiederaufbau (KfW), Germany and Japan International Cooperation Agency (JICA), Japan. Further, an amount of Rs. 5,894.25 crore was also raised through Commercial Paper (CP).

Cash Credit Facilities

The Company has an approved cash credit/WCDL limit of Rs. 5,000 crore for availment from various banks for its day-to-day operations.

5.3 Domestic and International Credit Rating

Domestic

The domestic debt instruments of REC continued to enjoy "AAA" rating - the highest rating assigned by CRISIL, CARE, India Ratings & Research and ICRA - Credit Rating Agencies.

International

The Company enjoys international credit rating equivalent to sovereign rating of India from International Credit Rating Agencies Moody''s and Fitch which are "Baa3" and "BBB-" respectively.

5.4 Cost of Borrowing

The overall weighted average annualized cost of borrowing for the funds raised during the financial year 2014-15 was 8.07% p.a. and Interest Coverage Ratio was 1.63. As a result, the Company was able to deliver debt financing at competitive rates.

5.5 Redemption and Pre-Payment

During the financial year 2014-15, the Company repaid a total sum of Rs. 20,833.10 crore. This includes repayment amounting to Rs. 4.86 crore to the Government of India, Rs. 7,491.68 crore to non-priority / priority sector bond holders, Rs. 5,239.36 crore worth of Capital Gain Tax Exemption Bonds and Rs. 307.80 crore of Official Development Assistance (ODA) loan. The Company also redeemed long term and short term loans from Banks and Financial Institutions of Rs. 1,689.40 crore and Commercial Paper of Rs. 6,100 crore.

5.6 Deployment of Resources at the close of the year

At the close of the financial year 2014-15, the total resources of your Company stood at Rs. 1,83,175.03 crore. Out of this, Equity Share Capital amounted to Rs. 987.46 crore, Reserves & Surplus stood at Rs. 23,869.57 crore, Loans from Financial Institutions, Commercial Banks and Market Borrowings through Bonds accounted for Rs. 1,51,024.12 crore, Deferred Tax Liabilities amounted to Rs. 107.32 crore and other liabilities & provisions stood at Rs. 7,186.56 crore. These funds were deployed as Long / Short Term Loans of Rs. 1,79,281.49 crore (net of allowances of Rs. 365.45 crore), Fixed Assets (net of depreciation) of Rs. 81.32 crore (including capital work-in-progress), Investments of Rs. 1,613.47 crore, Cash & Bank Balances of Rs. 522.90 crore and other assets of Rs. 1,675.85 crore.

5.7 Policy Initiatives

The Company constantly reviews and revises its lending and operation policies/ procedures from time to time, to suitably align with market requirements as also with its corporate objectives and applicable statutory requirements. During the year, the Company has reviewed policies relating to Funding against Regulatory Assets, Risk Management, Resource Planning, Premature Re-payment / Prepayment, Whistle Blower/Vigil Mechanism and CSR & Sustainability Policy. The interest rates in respect of term loan and short term loan were also reviewed/revised during the year.

Inspite of growing competition in the market, the Company has been able to maintain healthy spreads, balancing its objectives of business growth and profitability during the year.

6. PRESENT TRANSMISSION & DISTRIBUTION SCENARIO AND MAJOR CHALLENGES

The present scenario of Transmission and Distribution (T&D) industry is very challenging since the country has achieved highest ever Generation Capacity addition during the XI five year plan and further set a target for addition of 88,000 MW during the XII five year plan. The country is well on its course for achieving this target and the capacity of around 61,000 MW has already been added. This achievement shall pose an urgent requirement for creation of requisite T&D infrastructure during forthcoming years to be able to provide reliable, robust & efficient system for transfer of power from generation facilities to sub-stations and up to the consumer end.

Distribution has been identified as the weakest link in the power value chain and most difficult to deal with, due to ever increasing demand for affordable, reliable and quality power by various classes of consumers. Your Company has always strived to play an active role in creation of new infrastructure and augmentation/strengthening of the existing network. Your Company encourages the Distribution Companies (DISCOMs) to expedite various reform measures, adopt best practices including modernization and automation of systems/smart grid, IT enabled systems for metering & consumer services and helps them in improving their operational & financial performance.

Major challenges presently being faced by distribution sector includes high level of accumulated losses, high AT&C losses, limited capability to implement capital expenditure plans, delay in tariff order resulting in creation of regulatory assets, lack of tariff rationalisation leading to cross subsidy, delay in release of subsidy by State Government, delayed revenue collection cycle etc. which have caused a dent in DISCOMs'' cash flows. Keeping in tune with the times and dynamic environment, your Company today finances entire gamut of distribution projects broadly with the objective of system improvement & augmentation, loss reduction measures, IT-enabling, consumer satisfaction and any special requirements of DISCOMs based on prudence and sound appraisal mechanism.

Your Company is playing a pivotal role in partnering with Ministry of Power, Government of India in all major initiatives and is committed to improve & turn around the power distribution sector in the country, by its deep involvement in programme like Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) (Nodal Agency), Integrated Power Development Scheme (IPDS), National Electricity Fund (NEF) (Nodal Agency), Financial Restructuring Plan (FRP), Smart Grid Task Force etc. With all these major interventions, your Company is optimistic that distribution scenario would be much better in not too distant future.

6.1 Major reforms in Distribution sector

Government of India has made all efforts to intervene in the sector for ensuring overall development by way of Electricity Act, 2003 and various other policy measures such as National Tariff Policy, National Electricity Policy, Rural Electrification Policy etc., to provide a comprehensive framework and also the blueprint for power sector reforms. The sector has shown signs of improvement in operational and financial performance during last few years, which has still to go a long way.

In the past decade, Government of India has launched several programmes to extend the benefits to the ailing DISCOMs such as R-APDRP with an objective to strengthen the infrastructure and to reduce the losses, RGGVY to ensure last mile connectivity and to release service connections to BPL households, R-APDRP for undertaking improvements in urban pockets and to introduce IT enabling of distribution systems and presently DDUGJY and IPDS. Further, NEF - Interest Subsidy Scheme is also under implementation with objective to promote capital investment & expedite the reform process in distribution sector. Government of India has also made its intervention to restructure loans to enhance liquidity situation of the DISCOMs in joint participation with State Government by way of FRP scheme.

The introduction of information & communication technology in Power Distribution Sector shall enable the power system to become "SMART" & near-real-time information shall allow utilities to manage the entire system as an integrated framework, thus actively sensing and responding to changes. Further, Ministry of Power had approved 14 nos. Smart Grid Pilot Projects with 50% Government of India funding to test various functionalities in Indian Environment. Also, Government of India is promoting development of 100 smart cities, which shall lead to plethora of opportunities in further adoption of technology and best practises in the distribution segment.

The results of these measures have already started to show effect in terms of timely notification of tariffs by regulator in many states, filing of MYT petitions, claiming of Return of Equity in the ARR, release of revenue subsidy by State Government etc. The increased capital expenditure on part of DISCOMs may enable the strengthening of network such that the huge cost burden due to persistently high level of AT&C losses may be brought down and consequently the quality/reliability of supply to the end consumers may be ensured.

6.2 National Electricity Fund

REC is the Nodal Agency for National Electricity Fund (NEF) - interest subsidy scheme having provision of Rs. 8,466 crore (against interest subsidy) to be provided over 14 years on loan disbursements amounting to Rs. 25,000 crore, for distribution schemes sanctioned during the 2 years viz., 2012-13 and 2013-14. Ministry of Power, Government of India shall provide interest subsidy on loans disbursed to the State Power Utilities, DISCOMs - both in public and private sector, to improve the infrastructure in distribution sector. The scheme is aimed to incentivize much needed investment into distribution segment of power sector. The scheme is reform linked and interest subsidy of 3% to 7% is payable to the DISCOMs on achievement of reform based parameters outlined in NEF guidelines. Your Company during financial year 2012-13 & 2013-14 has already sanctioned projects as per provision of Rs. 25,000 crore to 25 DISCOMs in 14 states for taking benefits under NEF. The utilities from the states of Uttarakhand, Madhya Pradesh, Haryana and Rajasthan have already benefitted from the interest subsidy of Rs. 7.51 crore approved under the scheme. The other state DISCOMs will also start taking benefit of interest subsidy on loans availed based on their annual achievement on mainly two benchmark parameters i.e., reduction of AT&C losses & reduction in revenue gap (ACS & ARR).

7. FINANCING ACTIVITIES

Your Company has been providing funding assistance for power generation, transmission & distribution projects besides for electrification of villages. Details of major financing activities during the financial year 2014-15 are as under:

7.1 Generation

During the financial year 2014-15, your Company has sanctioned 34 nos. of Generation/R & M loans including 22 nos. of additional loan assistance with total financial outlay of Rs. 22,178.31 crore including consortium financing with other financial institutions and has disbursed Rs. 13,828.07 crore against the ongoing generation projects.

The sector wise break up of loans sanctioned including additional loan assistance is as under:

(Rs. in crore)

Particulars No. of Loans Loan Amount

STATE SECTOR

Fresh Loan 10 15,405.68

Additional Loan 7

PRIVATE SECTOR

Fresh Loan 2 6,772.63

Additional loan 15

Total 34 22,178.31

7.2 Renewable Energy

During the financial year 2014-15, your Company sanctioned loan assistance of Rs. 547.92 crore to 8 new grid-connected Renewable Energy projects with installed generation capacity aggregating to 193.86 MW which included 6 Solar photo-voltaic projects of 173.06 MW and 2 Wind projects aggregating to 20.8 MW.

The total cost of these projects aggregates to Rs. 1768.19 crore. Further, during the financial year 2014-15, total disbursement was Rs. 295.25 crore as detailed below:

Assistance to Renewable Energy Projects (Grid-Connected) Unit FY 2014-15 FY 2013-14

No. of Projects Sanctioned Nos. 8 6

Capacity of Sanctioned Projects MW 193.86 98

Cost of Projects Rs. crore 1,768.19 993.08

Loan Sanctioned Rs. crore 547.92 295.48

Loan Disbursed Rs. crore 295.25 134.99

7.3 Transmission & Distribution

Your Company continued to play an active role in creation of new infrastructure and improvement of the existing ones under the transmission and distribution network in the country under its T&D portfolio. In line with the Government of India''s objective to provide power for all by creation of infrastructure and also to reduce the AT&C losses, your Company has been financing schemes for expansion and strengthening of the transmission network and more importantly, modernizing the distribution system.

During the financial year 2014-15, your Company sanctioned 552 nos. of Transmission & Distribution schemes involving a total loan assistance of Rs. 25,031.14 crore. This includes primary power evacuation schemes associated with generating plants, system improvement schemes including R-APDRP projects, feeder segregation schemes, bulk loan schemes, intensive electrification schemes and pumpset energisation schemes.

The state-wise and category-wise details of the projects sanctioned are given in the enclosed Table 1 & 2, respectively. The major programmes covered by your Company under T&D sanctions in brief are as under:

7.3.1 System Improvement & Bulk Loan

To overcome the system deficiencies and to improve the quality and reliability of power supply, REC finances System Improvement schemes, based on system studies of an electrical distribution network considering present status of system capacities, connected demand, voltage profiles and level of losses, together with scope for future load growths.

The system improvement programme also includes Bulk loan schemes meant for procurement and installation of meters, transformers, capacitors, conductors, poles etc. System Improvement schemes reduce the AT&C losses to a great extent.

During the financial year 2014-15, a total of 467 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs. 24,213.57 crore. This included: (i) 96 schemes involving a loan assistance of Rs. 3,934.19 crore for financing investment in the distribution system by way of installation of essential equipment like transformers, meters, capacitors, etc.; (ii) 161 schemes for Rs. 4,408.16 crore for improving the distribution system; (iii) 77 schemes involving loan assistance of Rs. 2,412.46 crore towards counterpart funding of Part-B of R-APDRP projects; and (iv) 133 schemes for loan assistance of Rs. 13,458.77 crore for improving the transmission network.

7.3.2 Intensive Electrification

Schemes under this activity mainly aim at intensive electrification of already electrified villages. During the financial year 2014-15, a total of 23 intensive electrification schemes were sanctioned involving a loan outlay of Rs. 170.48 crore.

7.3.3 Pumpsets Energisation

REC''s loan portfolio also includes extension of loan assistance for energisation of agricultural pumpsets. During the financial year 2014-15, under REC financed schemes, 2,56,026 nos. of electric irrigation pumpsets were reported to be energized. A loan assistance of Rs. 647.09 crore was sanctioned for 62 new schemes during the year under this category. The state-wise details and cumulative position of pumpsets energized up to March 31, 2015 are given in the enclosed Table-5.

7.4 Financing Activities in North Eastern States

During the financial year 2014-15, a loan assistance of Rs. 968 crore towards cost overrun was sanctioned for Generation schemes to M/s Teesta Urja Limited located in North Eastern region (Sikkim). A loan assistance of Rs. 39.88 crore was sanctioned to Manipur State Power Distribution Company Limited for R-APDRP projects under T&D.

A total sum of Rs. 418.99 crore was disbursed during the financial year 2014-15 as against Rs. 977.41 crore in the previous year for Generation projects in North Eastern states which include Rs. 287.01 crore to M/s Teesta Urja Limited, Rs. 43.82 crore to M/s Lanco Energy Private Limited, Rs. 88.16 crore to M/s Dans Energy Private Limited.

7.5 Appraisal System for Financing

REC has its own methodology for appraisal of Private Sector Power Generation and Transmission Projects and the grading of the State Power Utilities. REC''s interest rates are linked to the grades assigned to the Private Sector Projects and State Power Utilities. REC, along with PFC, assists the Ministry of Power in bringing out integrated ratings for State Power Distribution Utilities and adopts the ratings as revised by Ministry of Power from time to time, to ensure uniformity in approach by various Banks/ Financial Institutions. The grading of State Power Utilities is an on-going process based on various parameters viz., financial, technical, tariff, regulatory measures, government support and management, etc.

8. INTERNATIONAL COOPERATION & DEVELOPMENT

REC had signed its third loan agreement with KfW, Germany on March 30, 2012 for availing ODA loan of EUR 100 million (approx Rs. 675 crore) for financing Renewable Energy Projects in the areas of Wind Power / Small Hydro Power / Biomass Cogeneration / Biomass Power / Solar PV / Solar Thermal & Energy Efficiency. The loan shall be drawn over five years i.e. upto December, 2017. Under KfW-III, approved renewable energy projects are under implementation and cumulative amount of EUR 77.68 million (approx. Rs. 597.07 crore) has been drawn as on March 31, 2015. Under JICA-II ODA loan, cumulative amount of JPY 10,923.90 million (approx. Rs. 591.68 crore), has been drawn as on March 31, 2015.

9. DEENDAYAL UPADHYAYA GRAM JYOTI YOJANA (DDUGJY)

The Government of India, in April 2005 had launched the "Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) Scheme of Rural Electricity Infrastructure and Household Electrification" vide Office Memorandum dated March 18, 2005, for providing access to electricity to all rural households. REC was the Nodal Agency for implementation of the Scheme. Under the scheme, 90% capital subsidy is being provided by Government of India which is released through REC to the respective Implementing Agencies of the State. Subsequently, RGGVY scheme has been subsumed in new ''Deendayal Upadhyaya Gram Jyoti Yojana'' (DDUGJY) scheme which was approved by Government of India vide Office Memorandum dated December 3, 2014. REC is the Nodal agency for implementation of the DDUGJY Scheme. Under DDUGJY, 60% of the project cost (85% for special States) is provided as grant by Government of India and additional grant upto 15% (5% for special States) is provided by Government of India on achievement of prescribed milestones. The main objectives of the scheme are to provide access to all rural households and reduction of AT&C losses as per trajectory (DISCOM-wise) finalized in consultation with States by the Ministry of Power, so as to achieve 24x7 power supply for non-agricultural consumers and adequate power supply for agricultural consumer through the following project components:

i. Separation of agriculture and non-agriculture feeders facilitating improved quality power supply to non-agricultural consumers and adequate power supply to agricultural consumers in the rural areas;

ii. Strengthening and augmentation of sub-transmission & distribution infrastructure in rural areas, including metering of distribution transformers/feeders/consumers; and

iii. Subsuming Rural Electrification component laid down under RGGVY for XII and XIII five year plans into DDUGJY.

Under DDUGJY, during financial year 2014-15, Rs. 8,853.12 crore have been approved by Monitoring Committee of Ministry of Power (Himachal Pradesh - Rs. 159.12 crore, West Bengal - Rs. 4,262.10 crore, Madhya Pradesh - Rs. 2,865.25 crore, Tamil Nadu - Rs. 924.12 crore, Uttar Pradesh - Rs. 313.93 crore and Andhra Pradesh - Rs. 328.60 crore) and Rs. 500 crore have been released by Government of India.

9.1 RE Component: Electrification of Villages and BPL Households

The initial approval was for implementation of the scheme for capital subsidy of Rs. 5,000 crore during X five year plan period. Continuation of the scheme in XI five year plan was conveyed by Ministry of Power vide Office Memorandum dated February 6, 2008 with an outlay of Rs. 28,000 crore as capital subsidy. Further, an additional budgetary support of Rs. 6,000 crore outlay was also allotted by Ministry of Power in the XI five year plan.

Collectively in X & XI five year plans, 648 projects with the scope of electrification of 1,11,974 un-electrified villages, intensive electrification of 3,63,507 villages and electricity connections to 2.64 crore BPL households costing for Rs. 43,222 crore have been sanctioned upto March 31, 2015 by the Ministry of Power. The state-wise details thereof are given in the enclosed Table-6.

Continuation of the Scheme in XII and XIII five year plans was also approved by Ministry of Power with capital subsidy of Rs. 35,447 crore, out of which Rs. 23,397 crore would be met through Gross Budgetary Support (GBS) for XII five year plan and remaining Rs. 12,050 crore in XIII five year plan.

Under XII five year plan, 273 projects with the scope of electrification of 8,830 un-electrified villages, intensive electrification of 2,32,376 villages and electricity connections to 132.36 lakh BPL households with the project cost of Rs. 23,607 crore have also been sanctioned by the Ministry of Power. The state-wise details thereof are given in the enclosed Table-7.

During the financial year 2014-15, work in 15,660 villages (1,405 un-electrified villages and 14,255 intensive electrification of villages) have been completed and free electricity connections to 7,59,377 BPL households have been provided. Further, during the financial year 2014-15, subsidy of Rs. 2,874.41 crore was disbursed by the Ministry of Power, Government of India, to REC for RE component of DDUGJY. Cumulatively, works in 1,09,524 un-electrified villages & intensive electrification of 3,14,958 villages have been completed and electricity connections to 2.18 crore BPL households have been provided under the scheme up to March 31, 2015. The state-wise details thereof are given in the enclosed Table-8.

During the financial year 2014-15, an amount of Rs. 4,002.73 crore (including subsidy of Rs. 3,605.72 crore under RE component of DDUGJY and Rs. 22.64 crore under DDG subsidy) has been disbursed. Also, a total of 3,173 nos. of villages were energized and closure of 275 nos. of projects as sanctioned in X and XI five year plan has been achieved as against MoU target of 300 projects.

10. DDUGJY- DECENTRALISED DISTRIBUTED GENERATION (DDG)

Decentralized Distributed Generation (DDG) under DDUGJY is for providing electricity access to the un-electrified villages/ habitations where grid connectivity is either not feasible or not cost effective. In the XII five year plan, DDG has also been extended to grid connected areas to supplement the availability of power in areas where power supply is less than 6 hours a day. DDG can be from conventional or renewable sources such as biomass, biofuels, biogas, mini-hydro, solar, etc. A provision of Rs. 900 crore has been kept as the subsidy under XII five year plan. However, the allocation under DDG would be flexible to meet any additional requirement within the overall cost of the scheme.

During the financial year 2014-15, 156 projects were awarded. REC has considered 505 DDG projects amounting to Rs. 128.66 crore with total capacity of about 3,119 KW in the states of Andhra Pradesh, Chhattisgarh, Rajasthan, Assam and Odisha. These projects have been recommended by Technical Committee to Monitoring Committee for sanction.

11. STANDARDISATION, QUALITY CONTROL & MONITORING

Your Company has continually provided technical expertise in the distribution system to State Power Utilities. The technical specifications and construction standards issued by the Company are used extensively by the State Power Utilities. The Company, in order to promote new technologies, has been continuously looking for innovations using latest R&D in the field of power distribution.

In line with the three-tier Quality Control Mechanism for ensuring proper quality of materials and works in implementation of RE component of DDUGJY XI five year plan schemes, REC Quality Monitors (RQM) under Tier-II have been appointed by REC covering 413 projects in 25 states. Further, during the financial year 2014-15, RQMs have undertaken inspections of 2,920 villages and 28 substations and also 93 nos. of material inspection at manufacturer premises were carried out in XI five year plan for ensuring quality of works.

12. RISK MANAGEMENT

The Company has a Risk Management Policy which covers Asset Liability Management (ALM) Policy and Hedging Policy. ALM Policy provides a framework for defining, measuring and monitoring the mismatches and Hedging Policy covers the management of currency risk. The Risk Management Policy of the Company was reviewed during the year and the revised policy was adopted with the approval of the Board of Directors.

12.1 Asset Liability Management

The Company has constituted an Asset Liability Management Committee (ALCO) under the chairmanship of CMD and comprises of Director (Finance), Director (Technical), one Part-time Non-official Independent Director, Executive Directors and General Managers from Finance and Operating Divisions as its members.

ALCO monitors risks related to liquidity, interest rates and currency rates. The liquidity risk is being monitored with the help of liquidity gap analysis and the Committee manages the liquidity risk through a mix of strategies such as forward looking resource raising programme based on projected disbursement and maturity profile. The interest rate risk is monitored through interest rate sensitivity analysis and managed through review of lending rates, cost of borrowings and the terms of lending & borrowing. Foreign currency risk associated with exchange rate and interest rate is managed through various derivative instruments.

12.2 Enterprise-Wide Integrated Risk Management

The Company has constituted a Risk Management Committee (RMC) which functions under the chairmanship of Part-time Non-official Independent Director and comprises of Director (Finance) and Director (Technical) as its members for monitoring the integrated risks of the Company. After the completion of the tenure of the only Part-time Non-official Independent Director on March 15, 2015, this Committee is to be reconstituted.

The main function of RMC is to monitor various risks likely to arise and practices adopted by the Company and also to initiate action for mitigation of risk arising in the operation and other related matters of the Company. The Company has identified its various risks and has taken various steps to mitigate them. The brief description of the same is as below:

i) Credit Risk:

Credit risk is a risk inherent in the financing industry and involves the risk of loss arising from the diminution in credit quality of a borrower and the risk that the borrower will default on contractual repayments under a loan or an advance. To mitigate the same, the Company follows systematic institutional and project appraisal process to assess the credit risk. These processes include a detailed appraisal methodology, identification of risks and suitable structuring and credit risk mitigation measures.

ii) Market Risk:

Market risk is the potential loss arising from changes in market rates and market prices. Our primary market risk exposures result primarily from fluctuations in interest rates and foreign currency exchange rates. In order to mitigate the interest rate risk, the Company periodically reviews its lending rates based on its cost of borrowing. We then determine our lending rates based on prevailing market rates, our weighted average cost of funding and our post tax margins.

iii) Liquidity Risk:

Liquidity risk is the risk of our potential inability to meet our liabilities as they become due. We face liquidity risks, which could require us to raise funds or liquidate assets on unfavourable terms. We manage our liquidity risk through a mix of strategies, including through forward-looking resource mobilization based on projected disbursements and maturing obligations.

iv) Foreign Currency Risk:

Foreign currency exchange risk involves exchange rate movements among currencies that may adversely impact the value of foreign currency-denominated assets, liabilities and off-balance sheet arrangements. The Company manages foreign currency risk associated with exchange rate and interest rate through various derivative instruments. For this, the Company has put in place a Hedging Policy to manage risk associated with foreign currency borrowings.

v) Legal Risk:

Legal risk arises from the uncertainty of the enforceability of contracts relating to the obligations of our borrowers. This could be on account of delay in the process of enforcement or difficulty in the applicability of the contractual obligations. We seek to minimize the legal risk through legal documentation and forward-looking contractual provisions in the legal documents.

vi) Operational Risk:

Operational risks are risks arising from inadequate or failed internal processes, people and systems or from external events. We have continually strengthened our systems and procedures to recognize and reduce operational risk in our business.

13. PREFERRED CUSTOMER POLICY

As a part of business promotion strategy, a Preferred Customer Policy was formulated in 2008 with the basic purpose of offering an enhanced level of services to the Company''s customers and to have a long term mutually beneficial relationship with them. The Policy lays down the eligibility criterion which takes into account various factors such as amount of loan outstanding, duration of loan relationship, repayment track record of the borrower etc. for determining preferred customers and sponsoring them for capacity building/domestic/international seminars/training programmes organized by various external agencies as well as CIRE, Hyderabad.

During the financial year 2014-15, under this Policy, participants from ten such preferred customers, mostly from the State Utilities viz. Maharashtra State Electricity Distribution Company Limited (MSEDCL), Maharashtra State Electricity Transmission Company Limited (MSETCL), Maharashtra State Power Generation Company Limited (MSPGCL), Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), Bangalore Electric Supply Company Limited (BESCOM), Karnataka Power Corporation Limited (KPCL), Chhattisgarh State Power Distribution Company Limited (CSPDCL), Rajasthan Rajya Vidyut Prasaran Nigam Limited (RRVPNL), Punjab State Power Corporation Limited (PSPCL) and Uttar Pradesh Power Corporation Limited (UPPCL) were sponsored by REC for 10 days training programme on "Global Best Practices in the Power Sector" held at Australia and New Zealand.

14. INFORMATION TECHNOLOGY INITIATIVES

An Integrated ERP system has been in operation since 2009 covering major business functions of the Company. Benefits of ERP system are being extended to the borrowers also as part of better service. Implementation of HR-ERP solution for automation of HR functions including Employee Self Service Portal across the Company is at advanced stage. Also, a Disaster Recovery Setup has been established in the Company for HR-ERP solution in January, 2015. Towards achieving efficient e-governance and transparency, REC has implemented on-line ''e-procurement'' system for procurement of goods and services of value above Rs. 5 lakh, as per CVC guidelines. In addition, to improve internal efficiency and transparency, REC has developed and implemented various internal systems viz. Annual Property Return System, Bill Payment & Tracking System in selective Divisions handling payments, Visitor Management System, Audit Management System, File Movement System, etc.

Both the Primary Data Centre (PDC) and Disaster Recovery Center (DRC) of REC are ISO/IEC 27001:2013 certified and are compliant with National Cyber Security Policy as notified by Department of Electronics and Information Technology (DeitY), Ministry of Communications and Information Technology, Government of India. REC is implementing suitable Video Conferencing (VC) solution across all offices of the Company. In Phase-I, VC solution will be implemented in Corporate Office and Zonal Offices.

To make employees IT enabled, desktop computers have been provided to nearly 100% employees (other than Class-IV employees). Further, IT Division of the Company organizes and imparts various training programmes both for internal requirements as well as for external agency also, on request, on ERP.

15. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION (CIRE)

CIRE was established at Hyderabad in 1979 under the aegis of REC to cater to the training and development needs of engineers and managers of Power and Energy Sector and other organisations concerned with Power and Energy. The programmes are conducted on state-of-the-art subjects of Power Generation, Transmission, Distribution and Renewable Energy sources. During the year, CIRE has been conferred with "Education Leadership Award" by Dewang Mehta Business School in the 22nd Business School Affaire in recognition of Leadership, Development, Innovation and Industry Interface of the Institute.

15.1 National Training Programmes under DDUGJY

CIRE is designated as the Nodal agency by Ministry of Power for implementation of National Training Programmes (NTP) on Franchisee and employees of C&D category under the Human Resources Development component of DDUGJY programme. The programmes are continued during XII five year plan with a target of training 1,25,000 employees of C&D category and 25,000 existing franchisees. During the year, CIRE/REC has entered into MoAs with 33 Power Utilities/Training Institutes. 30,453 employees of C&D category were trained by various power utilities/institutions.

During the financial year 2014-15, CIRE under its banner, has conducted 47 Programmes for employees of C&D category with 1,187 participants at various locations of power utilities on their request and has conducted 8 programmes as Training- of-Trainers (ToT) with 204 participants.

15.2 R-APDRP Programme

CIRE, as partner training institute, organized R-APDRP programmes sponsored by Ministry of Power. During the financial year 2014-15, CIRE has conducted 24 R-APDRP programmes (18 for employees of A&B category and 6 for employees of C&D category) on different themes viz. Efficiency Improvement Measures in Distribution System, Best Practices in Distribution Operation & Management System, Communication and Customer Relations in Post Go Live Scenario, Revenue Management & Loss Reduction in Post Go Live Scenario and O&M of Sub-stations for Linemen with 370 participants from different power utilities.

15.3 International Programmes

CIRE is empanelled by Ministry of External Affairs, Government of India to organise training programmes in the area of power sector under ITEC/SCAAP. During the year, CIRE has organised 9 International programmes with 153 participants on the topics, viz., Planning and Management of Power Transmission & Distribution Systems (8 weeks); Financial Management and Accounting System (including IFRS) for Power Companies (8 weeks); Best Practices in Power Distribution (5 weeks); Planning, Appraisal and Financial Management of Power Projects (8 weeks); Management of Power Utilities using IT/Automated Solutions (5 weeks); Design, Erection, O&M of EHV Sub-Stations (4 weeks); Solar Power Generation - Grid Enabling (4 weeks); Trends and Developments in Electric Power Generation (8 weeks) and Decentralised Distributed Generation & Rural Power Distribution Management (8 weeks).

The participants from various countries viz., Afghanistan, Algeria, Bangladesh, Bhutan, Ecuador, Egypt, Ethiopia, Gambia, Guyana, Indonesia, Iran, Jordan, Kenya, Kyrgyzstan, Laos, Lebanon, Liberia, Malawi, Mauritius, Myanmar, Namibia, Nigeria, Philippines, Rwanda, South Africa, Sri Lanka, Sudan, Syria, Tanzania, Thailand, Uganda, Ukraine, Vietnam, Zimbabwe, etc., have attended the above programmes.

15.4 Regular National Programmes

CIRE has organised 24 Regular Training Programmes with 400 participants for the personnel of various Power Utilities/ Distribution Companies, on different topics such as Technical Specifications and Construction Standards for Distribution System; Power Sector Accounting with reference to Indian Standards and IFRS; Pilferage of Electricity - Issues, Challenges and Remedial Measures; Protection System in Sub-Stations; Earthing Practices and Safety Measures in Electrical Installations; Open Access, Power Trading and Tariffs; Power and Distribution Transformers - Efficient Operation & Maintenance; High Voltage Distribution System Distribution Automation, Supervisory Control and Data Aquisition (SCADA) and Smart Grids; Solar Power Generation and Grid Enabling; Gas Insulated and Indoor Sub-stations including Power & Control Cables; Testing, Commissioning and Protection aspects in 33/11 KV Sub-stations; Design, O&M of Hydro Power Plants; Best Practices in Power Distribution Management; Power Factor Improvement and Reactive Power Management; Power Purchase Agreement; Tariff Policy & Submission of ARRs - Regulatory Compliance; Best Practices in O&M of EHV Lines and EHV Sub-stations; Efficiency Improvement Measures in Thermal Power Station; Technical Aspects for Non-Technical Executives; IT Applications for Distribution System Management and Latest Trends in Metering, Billing and Collection. In addition to the above, CIRE conducted a 1-day workshop on Ind-AS (IFRS) adoption in Indian power companies.

15.5 Programmes organised in collaboration

CIRE is organising training programmes in collaboration with a premier Management Institute i.e. Institute of Public Enterprise and conducted 4 programmes during the financial year 2014-15, viz., Best Practices in HR Management of Power Utilities; Materials Management, e-procurement & Contract Management; Companies Act, 2013 and Total Quality Management for Power Utilities with 47 participants.

15.6 Customized Programmes

During the financial year 2014-15, two induction programmes for Managers of Manipur Power Distribution Company Limited and two programmes for executives of Punjab State Power Corporation Limited on ''Power Distribution Management'' were organized at CIRE campus.

15.7 In-house Training Programmes

CIRE has also organised 7 in-house programmes for the employees of REC and 104 employees have taken part in these programmes. The topics covered are e-procurement/ Reverse Auction; Solar Power Generation and Grid Enabling; Loan Documentation and Legal Issues; CSR and Sustainable Development; Companies Act, 2013 and IFRS; Employee Engagement, Motivation and Team Building and Hindi Workshop.

15.8 In all, during the financial year 2014-15, in addition to coordinating and monitoring the National Training Programmes for Franchisees and employees of C&D category, CIRE has conducted 128 programmes on various themes and trained 2,539 personnel with 14,582 man-days of training.

16. ISO 9001:2008 QUALITY ASSURANCE CERTIFICATION

Your Company has implemented Quality Management Systems as per ISO 9001:2008 standards in six major Divisions of Corporate Office and all Zonal / Project Offices across the country for claims processing.

17. HUMAN RESOURCE MANAGEMENT

In order to professionalize the Executive strength of REC and also to infuse fresh blood, 24 executives were appointed through open advertisement during the financial year 2014-15. The total manpower of the Company as on March 31, 2015 was 601 employees which includes 427 executives and 174 non-executives.

17.1 Reservation in Employment

The directives issued by the Government of India regarding reservations for SC/ST etc. in appointment and promotion to various posts were complied with. The group wise details of SC and ST employees out of the total strength as on March 31, 2015, are given below:

Group Total No. of Employees SC ST

A 359(377) 33(35) 12(12)

B 121(122) 17(18) 2 (2)

C 42 (45) 7 (7) 0 (0)

D 79 (87) 24(27) 1 (1)

Total 601(631) 81(87) 15(15)

(Figures in brackets gives the corresponding position in the previous year)

As on March 31, 2015, 10 employees out of total employees are in the category of persons with disabilities which amounts to 1.66% of total manpower of the Company.

17.2 Training & Human Resource Development

As a measure of capacity building including up-gradation of employees'' skill sets and to ensure high delivery of performance, Training & HRD continued to receive priority during the financial year 2014-15. Training and Human Resource Policy of the Company aims at sharpening business skills and competence required for better employee performance and also provides all possible opportunities and support to the employees to improve their performance and productivity. Training was also provided to promote better understanding of professional requirements as well as to sensitize employees to socio-economic environment in which the business of the Company is carried out. Training, which helped employees in spiritual, health and attitudinal change process, was also imparted.

In order to equip the employees professionally, the Company sponsored 380 employees to various training programmes, workshops etc. within the country and abroad. In addition, three training programmes were conducted in-house which were attended by around 60 employees. Taken together, these initiatives enabled the Company to achieve 1,083 training man- days and also achieve an ''Excellent'' rating on the MoU target for this parameter. 24 officers were deputed for programmes in countries like USA, Japan, Taiwan, France, China, Singapore and Australia, etc.

Further, in terms of MoU target, 93 man-days as against 80 man-days, were devoted to impart training to officers for "assessing various risks i.e foreign exchange risk/credit risk/interest risk facing the company and measures to minimize the risk" and 28 officials as against 25 officials, were imparted training on "Leadership Development" in order to achieve ''Excellent'' rating for the financial year 2014-15.

17.3 Employee Welfare

In order to provide improved health care facilities to the employees and their dependent family members, the Company has expanded the list of empanelled hospitals under Direct Payment Scheme by adding 8 hospitals. Further, part time services of 4 specialized doctors were engaged to provide on-site medical facilities to employees. The Company has also been funding sports & recreation equipment for use by employees and promoting well-being of employees.

Sports Activities

During the financial year 2014-15, the Company hosted an Inter-CPSU Table-Tennis Tournament and also sponsored its employees for various Inter-CPSU sports tournaments such as Badminton, Table Tennis, Carrom, Kabbadi and Chess etc. organized by various power sector CPSUs under the aegis of Power Sports Control Board (PSCB). Further, employees were encouraged to participate in various quizzes, paper presentations and other simulation competitions conducted by reputed organizations like SCOPE, Power HR Forum and AIMA etc. Further, during the year Shri Vijay Behra, one of the employee, has won Gold Medal in Inter-CPSU Badminton Tournament (Singles Catogary) hosted by THDC India Limited.

17.4 Representation of Women Employees

As on March 31, 2015, the Company had 99 permanent women employees, which represent 16.47% of the total work force. There is no discrimination of employees on the basis of gender. A Women Cell has been in operation in the Company to look after welfare and all round development of women employees. International Women''s Day falling on March 8, was celebrated by REC Women Cell.

17.5 Industrial Relations

The Industrial Relations scenario in the Company continued to be cordial and harmonious in the financial year 2014-15. There was no loss of man-days on account of industrial unrest. Regular interactions were held with REC Employees'' Union and REC Officers'' Association on issues of employees'' welfare. This has helped to build an atmosphere of trust and cooperation resulting in a motivated workforce and continued improvement in business performance. Further, no disciplinary case is pending in the Company.

17.6 Public Grievance Redressal Machinery

In accordance with the guidelines issued by the Government of India, the Company has constituted a Grievance Redressal Committee to redress the grievances of officers and staff. The scope of the Committee has further been enlarged to cover Public Grievance also. One day in a week has been fixed as a Meeting-less day to attend to grievances by the Heads of Departments.

18. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

The ''REC Policy on Corporate Social Responsibility'' aligned with the provisions of the Companies Act, 2013 and Rules made thereunder, effective from April 1, 2014, was approved by the Board of Directors of the Company in its 402nd meeting held on March 28, 2014. The CSR Policy was renamed as the ''REC Corporate Social Responsibility & Sustainability Policy'' in line with the Guidelines for CSR and Sustainability for Central Public Sector Enterprises issued by Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises notified vide OM No. F.No. (13) 2013-DPE (GM) dated October 21, 2014 and updated to incorporate the amendments of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014 made thereunder, effective from April 1, 2014, in the 410th meeting of Board of Directors held on December 26, 2014. The ''REC Corporate Social Responsibility & Sustainability Policy'' is available on the website of the Company.

Further, as per the provisions of the Companies Act, 2013 & Rules made thereunder and DPE Guidelines on Corporate Social Responsibility and Sustainability, the Company has a ''Corporate Social Responsibility (CSR) Committee'' in place. The details related to composition and terms of reference of the CSR Committee is given in the Corporate Governance Report annexed to this report.

During the financial year 2014-15, the Corporate Social Responsibility and Sustainable Development (CSR & SD) initiatives of the Company were continued with a view to integrate REC''s business operations with social processes while recognizing the interests of its stakeholders. CSR & SD projects were linked with the principle of sustainable development. The strategic focus was aimed at CSR & SD initiative towards fulfilling the National Plan goals and objectives including Millennium Development Goals ensuring gender sensitivity, skill enhancement, entrepreneurship and employment generation by co-creating value with local institutions/ people. While identifying such initiatives, the Company has adopted an integrated approach to address the community, societal and environmental concerns measured in terms of triple bottom line approach. During the year, the Company has undertaken various CSR initiatives in the fields of skill development programmes, education, environmental sustainability, promotion of health care including for elderly persons and persons with disabilities, drinking water and sanitation facilities including, participation in ''Swachh Vidyalaya Abhiyaan'', LED based solar street lights in select un-electrified/ poorly electrified villages etc. The CSR strategy has been developed with action plan in project-based accountability approach. Most of the CSR activities have been implemented in project-mode, with baseline survey, specified time-frame, identified milestones and periodic monitoring and impact assessment. Disbursement of allocated funds under CSR was linked with achievement of the milestones and deliverables. During the financial year 2014-15, financial assistance aggregating to Rs. 251.22 crore was sanctioned for various projects under Corporate Social Responsibility, including Rs. 190 crore for construction of toilets in schools under ''Swachh Vidyalaya Abhiyaan'', out of which Rs. 67 crore is against allocation for financial year 2014-15 and Rs. 123 crore is against allocation for financial year 2015-16. Further, during the financial year 2014-15, REC has incurred expenditure for an amount of Rs. 103.25 crore (including Rs. 57.21 crore provided for in the books of accounts) towards approved CSR projects under implementation during the financial year. This amount of Rs. 57.21 crore provided for during the financial year 2014-15 has since been paid during the financial year 2015-16.

In terms of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Annual Report on CSR activities is annexed to this Report.

19. VIGILANCE ACTIVITIES

Vigilance Division continued to play a key role in improving transparency and accountability in the work processes and promoting ethics and integrity among the employees of the Company. The extant policies and guidelines were reviewed and Vigilance Division intervened wherever streamlining/modification was required to enhance objectivity and transparency. The Division regularly pursued with all concerned to ensure that CVC''s instructions were strictly implemented in the Company. In order to provide a comprehensive view of Vigilance Division''s activities, the section on Vigilance available on REC intranet website was restructured and all circulars from CVC and circulars issued by Vigilance Division, from time to time were regularly placed on REC intranet for information of all employees. Regular/surprise inspections were also carried out by officers of Vigilance Division in field offices and employees were sensitized about the importance of Vigilance and made aware that carelessness in observance of rules and procedures may attract disciplinary actions. Audit Reports were scrutinized from vigilance point of view.

Further, pursuant to initiatives of the Vigilance Division, the new implementations during the year were (a) a computerized Visitors Records Management System was operationalized (b) a comprehensive policy and procedure for reconciliation and maintenance of fixed assets was formulated and implemented (c) policy for engagement of advocates was made more comprehensive (d) review of third party payments through Bill Tracking System was initiated (e) concerned officials were sensitized about the process of ''Reverse Auction'' (f) File Movement System was implemented in Vigilance Division (g) sensitive posts were identified and intimated to HR Division for affecting rotation/transfer of officers working on these posts.

As per directives of CVC, REC observed Vigilance Awareness Week from October 27, 2014 to November 1, 2014. Various activities were organized in the Corporate Office as well as at field offices to enlist the participation of the people at large. At the Corporate Office, quiz and essay writing competitions were organized and dignitaries were invited for delivering lectures to sensitize the employees of the Company on various vigilance related topics. Further, a session on vigilance matters was included in all in-house training programmes for REC employees being conducted at Central Institute for Rural Electrification (CIRE), Hyderabad. The scrutiny of tendering procedure was carried out in some cases of contracts awarded during the period and suggestions were given to the concerned Divisions to improve/streamline the tendering mechanism for enhancing competitiveness and fairness. Security measures were taken to prevent any leakages/irregularities and improve the security system in the office premises. Training on e-procurement was also imparted to the concerned officials and compliance on resorting to e-procurement mode was monitored regularly by Vigilance Division.

With a view to enhance the knowledge of employees about vigilance related issues, a Vigilance Bulletin is being issued on a quarterly basis. The details of Immovable Property Returns (IPR) of all Executives have been uploaded on REC''s Website and vigilance clearance has been linked with timely submissions of IPRs. Annual Property Returns of the employees were subject to systematic scrutiny. Periodical returns were sent to CVC/MoP on time. The performance of Vigilance Division was reviewed regularly by the CVC, Board of Directors and CMD, in addition to constant reviews undertaken by the CVO in accordance with the prescribed norms.

20. IMPLEMENTATION OF OFFICIAL LANGUAGE

The Company excelled in most of the targets fixed by the Department of Official Language, Ministry of Home Affairs, in its Annual Programme for the financial year 2014-15. In order to encourage employees, all incentive schemes introduced by the Government of India have been implemented in the Company. During the year, employees of the Company have shown keen interest in the usage of Hindi; as a result its usage has increased in day-to-day work. To promote use of Hindi in official work, 6 Hindi workshops were organized at Corporate office in which 55 executives and 59 non-executives participated. This helped them to overcome the hesitation in using Hindi in their day-to-day work. Further, Hindi workshops were organized for "C" region during June 19-20, 2014 at CIRE, Hyderabad and during September 19-20, 2014 at Ayikudi Tirunevelli, Tamil Nadu, which were attended by 51 and 14 employees, respectively.

A Hindi Pakhwara was organized at REC Offices from September 14 - 28, 2014, in which nine Hindi competitions including Hindi Quiz and Sulekh Competition, etc. were organized for employees of the Company and the winners of these competitions & those who had done maximum original work in Hindi Scheme 2013-14, were awarded certificates of merit & cash prizes, at Prize Distribution Function which was organized on November 14, 2014. The said function was chaired by CMD, REC and reputed poets viz. Shri Hari Om Pawar, Dr. Dinesh Raghuvanshi and Shri Mahendra Ajnabi were invited who enthralled the audience with their Hindi poetry. Further, Dr. P.C.Tandon, Senior Reader in University of Delhi also addressed the audience and emphasized on the importance of usage of Rajbhasha in official work. The Zonal office - Panchkula and Project office - Shimla were also awarded third and second prizes by their respective Narakas for doing excellent work in Hindi. During the financial year 2014-15, the Company has been honoured with "Rajbhasha Shri Samman" and "Vishesh Rajbhasha Shri Samman" by Bharatiya Rajbhasha Vikas Sansthan, Dehradun for promoting Rajbhasha.

During the financial year 2014-15, four quarterly review meetings of Official Language Implementation Committee were held under the chairmanship of CMD, in which detailed discussions were held to review the progress and suggest measures to overcome the difficulties in order to achieve the targets. During the year, inspections were also carried out to assess the progressive use of Hindi in 11 Divisions at Corporate Office and 9 Project Offices and suggestions were given to employees to improve the shortcomings. The officials of Ministry of Power also inspected two Project Offices during the year. Further, as against the target of 25% inspection of Divisions of Corporate Office & Project Offices, set out in the Annual Programme 2014-15 by the Official Language Department, the Company achieved double the target of inspections at Corporate Office as well as Project Offices.

The website of the Company is maintained both in Hindi and English and is regularly updated from time to time. Bilingual working facility has been made available on all computers. All publications, reports, memorandums, press releases, MoUs, tenders, annual reports etc. were issued bilingually. To give impetus to the correspondence in Hindi, standard formats have also been made available on intranet. Further, the Company''s library is equipped with large number of Hindi literary books, magazines & reference publications and the required ratio in purchase of Hindi & English books was also ensured.

21. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO.

21.1 Conservation of Energy

There are no significant particulars relating to conservation of energy, technology absorption under the Companies (Accounts) Rules, 2014, as the Company does not own any manufacturing facility. However, the Company has made intensive use of technology in its operations during the year under review.

All civil, electrical installation & maintenance of "SCOPE Complex", where the Company''s Registered Office is located is carried out by Standing Conference of Public Enterprises (SCOPE), an autonomous body. During the financial year 2014-15, SCOPE has saved around 4 lakh units of electricity consumption, resulting in saving of Rs. 40 lakh in terms of amounts mainly due to effective monitoring, controlling & scheduling the operations of chilling units, elevators, etc. & initiatives like installing energy efficient equipment, replacement of conventional light fittings/CFL, etc. with LED light fittings and maintaining power factor nearest to unity.

Further, during the financial year 2014-15, REC has also taken initiative to replace all conventional light fittings/CFL with energy efficient LED lights at its Registered office.

21.2 Foreign Exchange Earnings & Outgo

No foreign exchange was earned during the financial year 2014-15. However, the foreign exchange outflow aggregating Rs. 513.09 crore was made during the financial year on account of interest, finance charges and other expenses.

22. SUBSIDIARY COMPANIES

Your Company has two Wholly Owned Subsidiaries (WOS), to focus on additional business of consultancy in the areas of distribution, transmission etc.:

(i) REC Power Distribution Company Limited (CIN: U40101DL2007GOI165779); and

(ii) REC Transmission Projects Company Limited (CIN: U40101DL2007GOI157558)

Further, in order to initiate development of each independent inter state transmission project allocated by Ministry of Power, Government of India, RECTPCL incorporates project specific Special Purpose Vehicle (SPV) as Wholly Owned Subsidiary Company and after the selection of successful bidder through Tariff Based Competitive Bidding Process notified for transmission projects, the respective project specific SPV along with all its assets and liabilities is transferred to the successful bidder. As on date, the following project specific SPVs existed as Subsidiary Companies of RECTPCL:

i. Nellore Transmission Limited (NTL) (CIN: U40104DL2012GOI245654)

ii. Baira Siul Sarna Transmission Limited (BSSTL) (CIN: U40106DL2013GOI247564)

iii. Maheshwaram Transmission Limited (MTL) (CIN: U40102DL2014GOI270446)

iv. Vemagiri II Transmission Limited (V-II TL) (CIN: U40106DL2015GOI278746)#

v. Alipurduar Transmission Limited (ATL) (CIN: U40109DL2015GOI278992)#

vi. NER-II Transmission Limited (N-II TL) (CIN: U40106DL2015GOI279300)#

# Incorporated after March 31, 2015

22.1 REC Power Distribution Company Limited

During the financial year 2014-15, REC Power Distribution Company Limited (RECPDCL) has excelled in the area of Third Party Inspection (TPI) and also set its quality benchmark in preparation of Detailed Project Reports (DPRs) through Global Positioning System (GPS) based field survey. The new initiatives undertaken by RECPDCL during the year include:

i. IT Implementation works under R-APDRP Part-A for Goa Electricity Department Detailed Project Report (DPR) preparation works;

ii. Project Management Consultancy (PMC) services under R-APDRP Part-B/IPDS/DDUGJY/any other departmental scheme of Goa Electricity Department (GED);

iii. PMC work under DDUGJY-RE XII five year plan in 17 districts for Purvanchal Vidyut Vitran Nigam Limited (PuVVNL) and 21 districts for Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL);

iv. Preparation of DPR for revamping the rural electrification under electric supply area (Jamshedpur, Dumla, Dhanbad), DPR preparation under Decentralized Distribution Generation (DDG) scheme of Government of India for Assam Power Distribution Company Limited (APDCL) and Electricity Department, Nagaland;

v. Third Party Inspection of erection work and material of DDUGJY-RE XI five year plan for North Bihar Power Distribution Company Limited (NBPDCL), South Bihar Power Distribution Company Limited (SBPDCL) through open tender;

vi. Third Party Inspection works and workmanship of DDUGJY-RE XI five year plan in Solapur District under Maharashtra State Electricity Distribution Company Limited (MSEDCL);

vii. Preparation of Cost Data Book for financial year 2014-15 for Delhi Electricity Regulatory Commission (DERC);

viii. Load Research Analysis for South Bihar Power Distribution Company Limited (SBPDCL) and North Bihar Power Distribution Company Limited (NBPDCL) under DSM scheme for Energy Efficiency Services Limited (EESL);

ix. Besides these works, RECPDCL was engaged as a Project Management Agency (PMA) for DDUGJY and IPDS schemes of Government of India in the following DISCOMs:

1. Paschimanchal Vidyut Vitran Nigam Limited (PsVVNL)

2. Dakshinanchal Vidyut Vitran Nigam Limited (DVVNL)

3. Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited (MPMKVVCL)

4. Madhya Pradesh Poorv Kshetra Vidyut Vitran Company Limited (MPPoKVVCL)

5. West Bengal State Electricity Distribution Company Limited (WBSEDCL)

During the financial year 2014-15, RECPDCL has prepared 61 Detailed Project Reports (DPRs) under DDUGJY-RE XII five year plan and 11 DPRs under RE works for Jharkhand DISCOMs and carried out Third Party Inspection (TPI) for various schemes.

Further, REC has engaged RECPDCL as Project Implementing and Monitoring Agency for construction of toilets in schools in Uttar Pradesh, Madhya Pradesh, Bihar, Telangana, Rajasthan and Punjab under its CSR initiative under ''Swachh Vidyalaya Abhiyaan'' in response to Prime Minister''s call to the nation. RECPDCL started the project by organizing Inaugural Event in 90 Schools in Ballia district of Uttar Pradesh on October 2, 2014.

RECPDCL has been conferred with ISO 14001:2004 Quality Assurance Certification, for implementing Quality Management Systems as per ISO 14001:2004 in the field of management of environmental aspects related to carrying out all the administrative and other allied activities through protection of environment in Corporate Office of the company.

The performance of RECPDCL in terms of MoU signed with the holding company i.e Rural Electrification Corporation Limited for the financial year 2013-14 has been rated as "Excellent" by the Department of Public Enterprise (DPE), Government of India. For the financial year 2014-15 also, the performance of RECPDCL is poised to receive "Excellent" rating.

The performance of RECPDCL has improved and the financial performance of the company is on the fast trajectory growth path. During the financial year 2014-15, the company''s total revenue has increased by 16.75% to Rs. 87.76 crore compared to the previous year income of Rs. 75.16 crore. The Profit Before Tax (PBT) has increased by 4.66% to Rs. 52.52 crore as compared to Rs. 50.18 crore in the previous year. Further, the Profit After Tax (PAT) has also increased by 5.35% to Rs. 34.77 crore from Rs. 33 crore during the previous year. The Board of Directors of RECPDCL has recommended a Dividend of Rs. 100/- per equity share of face value of Rs. 10/- each i.e 1,000% for the financial year 2014-15 on paid up share capital of the company, subject to approval of shareholders of the company in the ensuing Annual General Meeting.

22.2 REC Transmission Projects Company Limited

During the financial year 2014-15, the Central Electricity Authority/ Ministry of Power, Government of India nominated REC Transmission Projects Company Limited (RECTPCL) as the Bid Process Coordinator for selection of developer for following eight inter state transmission systems with aggregate estimated cost of Rs. 21,040 crore:

i. Transmission system associated with Gadarwara STPS (2 X 800 MW) of NTPC (Part-A);

ii. Transmission system associated with Gadarwara STPS (2 X 800 MW) of NTPC (Part-B);

iii. Connectivity lines for Maheshwaram (Hyderabad) 765/400 kV Pooling S/s;

iv. Transmission System Strengthening associated with Vindhyachal-V;

v. Transmission System for LTA of 400 MW for 2x500 MW Neyveli Lignite Corporation Ltd. TS-I (Replacement) (NNTPS) in Neyveli;

vi. Transmission System Strengthening in Indian System for transfer of power from new HEPs in Bhutan;

vii. NER System Strengthening Scheme-II; and

viii. Strengthening of transmission system beyond Vemagiri.

In order to initiate development of each independent inter state transmission project allocated by Ministry of Power, Government of India, RECTPCL incorporates a project specific Special Purpose Vehicle (SPV) as Wholly Owned Subsidiary Company. Further, for each of the transmission project, a two stage Bidding process featuring separate Request for Qualification (RfQ) and Request for Proposal (RfP) is adopted in accordance with Tariff Based Competitive Bidding Guidelines of Ministry of Power, Government of India for selection of developer as Transmission Service Provider. After the selection of successful bidder through Tariff Based Competitive Bidding Process notified for transmission projects, the respective project specific SPV along with all its assets and liabilities is transferred to the successful bidder.

Details of transmission projects for which bidding process has been concluded during financial year 2014-15 and financial year 2015-16 (till April 30, 2015) is given below:

Sl. Name of Transmission Year of Name of project specific No. Project allocation SPV

1. Northern Region System 2013-14 NRSS XXXI (A) Strengthening Scheme, NRSS Transmission Limited - XXXI (Part-A)

2. Northern Region System 2013-14 NRSS XXXI (B) Strengthening Scheme,NRSS Transmission Limited - XXXI (Part-B)

3. Northern Region System 2013-14 NRSS XXIX Transmission Strengthening Scheme,NRSS Limited - XXIX

4. Transmission System 2014-15 Vindhyachal Jabalpur Strengthening associated with Transmission Limited Vindhyachal-V

5. Transmission system 2014-15 Gadarwara (A) Transco associated with Gadarwara Limited STPS (2 X 800 MW) of NTPC (Part-A)

6. Transmission system associated 2014-15 Gadarwara (B) with Gadarwara STPS (2 X 800 Transmission Limited MW) of NTPC (Part-B)

Name of Transmission Project Name of Selected Date of Transfer of Bidder project specific SPV to selected bidder

Northern Region System Strengthening Scheme, NRSS-XXXI(Part-A) Power Grid May 12, 2014 Corporation of India Limited

Northern Region System Strengthening Scheme, NRSS - XXXI (Part-B) Essel Infraprojects May 12, 2014 Limited

Northern Region System Strengthening Scheme, NRSS - XXXI Sterlite Grid Limited August 4, 2014

Transmission System Strengthening associated with Vindhyachal-V Power Grid February 26, 2015 Corporation of India Limited

Transmission System associated with Gadarwara STPS (2x800 MW) of NTPC (Part-A) Power Grid April 24, 2015 Corporation of India Limited

Transmission System associated with Gadarwara STPS (2x800 MW) of NTPC (Part-B) Power Grid April 24, 2015 Corporation of India Limited

Further during the financial year 2015-16, three Wholly Owned Subsidiary companies have been incorporated as project specific Special Purpose Vehicles (SPVs) of RECTPCL viz. (i) Vemagiri II Transmission Limited (CIN: U40106DL2015GOI278746) on April 6, 2015; (ii) Alipurduar Transmission Limited (CIN: U40109DL2015GOI278992) on April 13, 2015; and (iii) NER-II Transmission Limited (CIN: U40106DL2015GOI279300) on April 21, 2015.

In respect of Transmission System for LTA of 400 MW for 2x500 MW Neyveli Lignite Corporation Ltd. TS-I (Replacement) (NNTPS) in Neyveli, considering the small size of project, CEA has recommended Ministry of Power to de-notify the project from tariff based competitive bidding process. During the year, Central Electricity Authority, Ministry of Power, Government of India vide Gazette Notification dated February 9, 2015 had de-notified one transmission project viz., Baira Siul HEP - Sarna 220 kV D/c line from tariff based competitive bidding process. Further, Ministry of Power vide Gazette Notification dated January 2, 2014 had earlier de-notified the transmission project for Transmission System for Connectivity for NCC Power Projects Limited (1320 MW) due to discovery of higher tariff as compared to CERC norms.

During the financial year ended March 31, 2015, RECTPCL has recorded an income of Rs. 72.44 crore. The Profit Before Tax and Profit After Tax for the year is Rs. 69.92 crore and Rs. 47.54 crore, respectively. The Net worth of the company is Rs. 105.01 crore against initial capital of Rs. 0.05 crore injected by REC in year 2007. The Board of Directors of RECTPCL has recommended a Dividend of Rs. 1,902/- per equity share of face value of Rs. 10/- each i.e 19,020% for the financial year 2014-15 on paid up share capital of the company, subject to approval of shareholders of the company in the ensuing Annual General Meeting.

23. DETAILS OF JOINT VENTURE AND ASSOCIATE COMPANY

REC, along with three other PSUs, viz. Power Grid Corporation of India Limited, NTPC and PFC as equal partners, has formed a Joint Venture Company by the name of Energy Efficiency Services Limited (EESL) on December 10, 2009. Your Company has contributed Rs. 22.50 crore (being 25% of paid-up capital of EESL) upto March 31, 2015. Further, during the financial year 2015-16, REC has infused an additional amount of Rs. 25.00 crore towards equity subscription in EESL.

EESL is formed to create & sustain market access of energy efficient technologies particularly in the public facilities like municipalities, buildings, agriculture, industry etc. and to implement several schemes of Bureau of Energy Efficiency, Ministry of Power, Government of India. EESL is also leading the market related activities of the National Mission for Enhanced Energy Efficiency (NMEEE), one of the 8 national missions under National Action Plan on Climate Change. The Business verticals of the company inter-alia include implementing projects in Energy Service Company (ESCO) mode in Agriculture Demand Side Management (AgDSM), Municipal Demand Side Management (MuDSM), Distribution Energy Efficiency projects, Building, Small & Medium Enterprises (SMEs), Perform, Achieve and Trade-Joint Implementation Plan (PAT-JIP), Corporate Social Responsibility activities, etc.

Currently, EESL is implementing Municipal Street Lighting projects with various Municipal Corporation and AgDSM projects for replacement of inefficient Agricultural Pumpsets in agriculture Sector, DSM Based Efficient Lighting Programme (DELP) in domestic residential sector in ESCO mode with various Utilities and CSR projects of various companies.

The performance of EESL during the year 2014-15, has improved and the financial performance of the company is on the growth path. During the financial year 2014-15, the company''s total revenue is Rs. 62.53 crore compared to the previous year income of Rs. 16.75 crore. The Profit Before Tax (PBT) is Rs. 13.57 crore as compared to Rs. 4.81 crore in the previous year. Further, the Profit After Ta x (PAT) has also increased to Rs. 9.05 crore from Rs. 1.02 crore during the previous year. The Board of Directors of the company has recommended dividend of Rs. 2.71 crore i.e. 30% of PAT for the financial year 2014-15, subject to approval of shareholders of the company in the ensuing Annual General Meeting.

24. CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129 of the Companies Act, 2013 and Accounting Standard-21, the Company has prepared Consolidated Financial Statements including that of its Subsidiary Companies i.e RECTPCL and RECPDCL and Joint Venture Company i.e EESL, which shall be laid before the members at the 46th Annual General Meeting along with the Standalone Financial Statements of the Company. However, those subsidiary companies which are incorporated for the purpose of subsequent disposal have not been consolidated in the financial statements of the Company.

Pursuant to sub-section (3) of Section 129 of the Act, a statement containing the salient features of the financial statements of subsidiaries and joint venture in Form AOC-1 forms part of this Annual Report.

The Audited Financial Statements including the Consolidated Financial Statements and Audited Accounts of Subsidiaries of the Company are available on the website of the Company at www.recindia.gov.in. Further, these documents will be available for inspection during the business hours by any member or trustee of the holder of any debentures at the Registered Office of the Company. The Company will also make available copy thereof upon specific request by any member of the Company interested in obtaining the same.

25. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Being a Government Company, the power of appointment of Directors on the Board of the Company is vested with the President of India acting through the Ministry of Power, Government of India. The remuneration of Directors and employees of the Company is fixed as per extant Guidelines issued by Department of Public Enterprises (DPE), from time to time. Further, the Part-time Non-official Independent Directors are paid sitting fees, as decided by the Board of Directors from time to time (within the limits prescribed under the Companies Act, 2013) for attending Board and Committee meetings. As per the norms of Government of India, the Government Nominee Director is not entitled to receive any remuneration/ sitting fee from the Company. The details of remuneration/sitting fees paid to Directors are given in Corporate Governance Report annexed to this report.

Further, Ministry of Corporate Affairs (MCA) vide Notification dated June 5, 2015, has exempted Government Companies from the requirements related to criteria formulation for determining qualifications, positive attributes and independence of Directors and policy relating to remuneration of Directors.

As per the provisions of the Companies Act, 2013, Chairman and Managing Director (CMD), Director (Technical), Director (Finance) and Company Secretary are Key Managerial Personnel (KMPs) of the Company. The role of CEO is being performed by the CMD and the role of CFO is being performed by Director (Finance) of the Company. None of the Key Managerial Personnel has resigned or has been appointed, during the year under review.

Further, as on April 1, 2014, there were three Part-time Non-official Independent Directors on the Board of the Company viz. Dr. Devi Singh (DIN: 00015681), Shri Venkataraman Subramanian (DIN: 00357727) and Dr. Sunil Kumar Gupta (DIN: 00948089). All the Independent Directors had given declaration that they meet the criteria of independence as laid down under Section 149 of the Companies Act, 2013.

During the financial year 2014-15, the tenure of three years of Dr. Devi Singh and Shri Venkataraman Subramanian, Part-time Non-official Independent Directors was completed on June 9, 2014 and that of Dr. Sunil Kumar Gupta, Part-time Non-official Independent Director was completed on March 15, 2015. Consequently, they ceased to be Directors on the Board of the Company with effect from the respective dates. The Board places on record its appreciation of the valuable contribution and guidance provided by Dr. Devi Singh, Shri Venkataraman Subramanian and Dr. Sunil Kumar Gupta to the Company.

Further, as per the provisions of the Companies Act, 2013 and in terms of provisions of Article 82 (4) of Articles of Association of the Company, Shri Prakash Thakkar (DIN: 01120152) shall retire by rotation at the 46th Annual General Meeting and being eligible, offers himself for re-appointment. The Board of Directors recommends his reappointment as Director, till the date of his superannuation. His brief resume is annexed to the Notice of the Annual General Meeting.

26. EVALUATION OF BOARD OF DIRECTORS/INDEPENDENT DIRECTORS

As per the provisions of the Companies Act, 2013 and Rules made thereunder, a listed company is required to disclose in its Board''s Report, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and Individual Directors. Further, as per the provisions of Listing Agreement entered with the Stock Exchanges, the criteria for performance evaluation of independent directors, as laid down by the Nomination and Remuneration Committee, is also required to be disclosed in the Annual Report.

REC, being a Government Company, the performance evaluation of Functional Directors is done by Chairman and Managing Director (CMD) of the Company and performance evaluation of CMD, the Company and its Board is done by Secretary (Power), Ministry of Power, Government of India. Further, the power of appointment and evaluation of performance of Independent Directors is also vested with the President of India, acting through administrative Ministry..

Further, Ministry of Corporate Affairs (MCA) vide Notification dated June 5, 2015, has prescribed that the requirement of carrying out formal annual evaluation by the Board of its own performance and that of its committees and individual directors is not applicable in case of Government Companies since the same is done by the Administrative Ministry.

27. MoU RATING AND AWARDS

The performance of your Company in terms of MoU signed with the Ministry of Power, Government of India for the financial year 2013-14 has been rated as "Excellent". This is the 21st year in succession that REC has received "Excellent" rating since the year 1993-94 when the first MoU was signed with the Government. For the financial year 2014-15 also, the Company is poised to receive "Excellent" rating. During the year, your Company received ''Company of the Year'' award for ''Operational Performance Excellence'' under PSE Excellence Awards 2014. Your Company also received Award for ''Excellence in Financial Services'' under India Pride Awards 2014-15 from Dainik Bhaskar & DNA.

During the financial year 2014-15, the Company has received 13th ICSI National Award for Excellence in Corporate Governance from the Institute of Company Secretaries of India (ICSI), a statutory body constituted under the Company Secretaries Act, 1980, in recognition of the good Corporate Governance practices followed by REC.

28. BOARD & COMMITTEES OF THE BOARD

The details of the composition, terms of reference and number of meetings of the Board and its Committees held during the financial year 2014-15 are provided in the Corporate Governance Report annexed to this Report.

29. DIRECTORS'' RESPONSIBILITY STATEMENT

With reference to Section 134(5) of the Companies Act, 2013, it is confirmed that:

(i) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable Accounting Standards have been followed and no material departures have been made from the same;

(ii) such accounting policies have been selected and applied consistently (except for changes in Accounting Policies as disclosed in the Notes to Accounts to the Financial Statements) and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the annual accounts have been prepared on a going concern basis;

(v) internal financial controls have been laid to be followed by the Company and such internal financial controls were adequate and operating effectively; and

(vi) proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively.

30. "THINK GREEN, GO GREEN" INITIATIVE

The Companies Act, 2013 permits companies to send documents like Notice of Annual General Meeting, Annual Report and other documents through electronic means to its members at their registered email addresses, besides sending the same in physical form.

As a responsible Corporate Citizen, the Company has actively supported the implementation of ''Green Initiative'' of Ministry of Corporate Affairs (MCA) and effected electronic delivery of Notices and Annual Reports since year 2010-11 to those shareholders whose email ids were already registered with the respective Depository Participants (DPs) and who have not opted for receiving such documents in physical form. The intimation of dividends (interim/final) is also being sent electronically to those shareholders whose email ids are registered.

Members, who have not registered their e-mail addresses so far, are requested to register their e-mail address with the Registrar and Share Transfer Agent (R&TA) of the Company / Depository Participant (DP) of respective member and take part in the Green Initiative of the Company, for receiving electronic communications and support the "THINK GREEN, GO GREEN" initiative.

It is reiterated that upon receipt of requisition from the member including the members who have exercised the option of electronic delivery of these documents, every member of the Company is entitled to receive free of cost, a copy of the Balance Sheet of the Company and all other documents required by law to be attached thereto, including the Statement of Profit and Loss and Auditors'' Report, etc.

Further, pursuant to Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014, the Company is providing e-voting facility to all members to enable them to cast their votes electronically in respect of resolutions set forth in the Notice of Annual General Meeting (AGM). The detailed instructions for e-voting are provided in the Notice of AGM.

31. SWACHH BHARAT ABHIYAAN

''Swachh Bharat Abhiyaan'' was celebrated in the Company from September 25, 2014 to October 2, 2014. On the birth anniversary of Mahatma Gandhi, Father of the Nation on October 2, 2014, ''Swachh Bharat Diwas'' was celebrated with enthusiasm amongst employees at all offices of the Company and on this occasion, ''Swachhta Shapath'' was administered by the CMD at Corporate Office wherein he emphasized that this Abhiyaan should be carried out as a ''continuous process'' and appealed to the employees to carry forward this noble movement.

Cleanliness drive of neighbourhoods at all offices of REC was also carried out wherein the employees participated with immense enthusiasm and zeal. Further, to ensure wider dissemination of this message, posters were made and displayed at all REC offices to sensitize the employees on the issues of cleanliness. In furtherance of this Abhiyaan, various initiatives were taken which include printing of logo of ''Swachh Bharat Mission'' on all file covers and letterheads of the Company, weeding out of old records to make workstations clean & presentable, ease storage space constraints, proper stacking of records and files with indexing, proper clipping of wires/cables, phasing out the old IT hardware and furniture, clear access and cleanliness of passages etc. The Company is fully committed towards the cause of creating a clean India and will continue to improve the cleanliness in and around the premises.

Further, an essay Competition on ''Cleanliness is next to Godliness'' was also organized in the Company in which many employees participated. A suggestion scheme for employees was organized on "How to improve cleanliness of our work place" and best suggestions were rewarded.

32. RIGHT TO INFORMATION ACT, 2005

The Company has taken necessary steps for the Implementation of "Right to Information Act, 2005 (RTI)" in REC and independent RTI Cell has been set up for coordinating the work relating to receipt of applications and appeals and furnishing information thereto. RTI Handbook, both in English and Hindi, has been placed on REC website which is updated periodically.

The status of RTI applications and appeals during the financial year 2014-15 is as follows:

Sl. Particulars Nos. No.

1. Applications received (upto March 31, 2015) 263

2. Applications disposed of (upto March 31, 2015) 248

3. Applications disposed of subsequently 15

4. Appeals received by First Appellate Authority, REC 19

5. Appeals disposed of by First Appellate Authority, REC 19

6. Second Appeal notice received from Central Information Commission (CIC) Nil

7. Second Appeal disposed of by Central Information Commission (CIC) Nil

33. ESTABLISHMENT OF VIGIL MECHANISM

In pursuance to the provisions of the Companies Act, 2013 and the Listing Agreement entered with the Stock Exchanges, the Company has established a ''Vigil Mechanism'' for Directors and employees to report their genuine concerns or grievances about unethical behavior, actual or suspected fraud or violation of Company''s Code of Conduct or Ethics Policy. As an integral part of such Vigil Mechanism, the Whistle Blower Policy of REC has been formulated with a view to empower the Directors and employees of REC and / or its subsidiary companies, to detect and report any improper activity within the Company and the same is also available on the website of the Company at the link http://www.recindia.nic.in/images/pdf-files/ WhistleBlowerPolicy.pdf. For further details, please refer to the ''Report on Corporate Governance'' annexed to this report.

34. REPORTING UNDER PUBLIC PROCUREMENT POLICY FOR MICRO & SMALL ENTERPRISES (MSES) ORDER, 2012

To encourage participation by Micro, Small and Medium Enterprises (MSMEs) including Micro and Small Enterprises owned by SC/ST, all the directives mentioned in the Public Procurement Policy Order, 2012 have been included in REC procurement guidelines and it has also been uploaded in REC''s website at the link: http://www.recindia.nic.in/images/pdf-files/Public ProcurementPolicy.pdf.

REC, being a financial institution is not executing any project. Hence, only petty purchases i.e. stationery and office equipment from small vendors are being made.

35. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

In line with provisions of ''Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013'', an ''Internal Complaints Committee'' has been constituted in the Company for redressal of complaint(s) against sexual harassment of women employees. The Committee is headed by a senior level woman official of the Company and includes an NGO representative as one of its members. Anti-sexual harassment stance of the Company is also outlined in REC (Conduct, Discipline and Appeal) Rules.

During the financial year 2014-15, the Company did not receive any complaint of sexual harassment.

36. EXTRACT OF ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in Form MGT - 9, is annexed to this Report.

37. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contract(s) or arrangement(s) entered into by the Company with related parties as per the provisions of the Companies Act, 2013 are disclosed in Form AOC-2, annexed to this Report.

38. AUDITORS

STATUTORY AUDITORS

M/s Raj Har Gopal & Co., Chartered Accountants (Firm Reg. No.: 002074N), New Delhi and M/s P.K. Chopra & Co., Chartered Accountants (Firm Reg. No.: 006747N), New Delhi, were appointed as Joint Statutory Auditors of the Company for the financial year 2014-15 by the Comptroller and Auditor General (C&AG) of India. The Joint Statutory Auditors have audited the Financial Statements of the Company for the financial year ended March 31, 2015.

Further, the Comptroller and Auditor General (C&AG) of India, in exercise of powers conferred under Section 139 of the Companies Act, 2013 has appointed M/s. Raj Har Gopal & Co., Chartered Accountants (Firm Reg. No.: 002074N), New Delhi and M/s. A. R. & Co., Chartered Accountants (Firm Reg. No.: 002744C), New Delhi, as the Joint Statutory Auditors of the Company for the financial year 2015-16 and the Joint Statutory Auditors have also accepted their appointment. Approval of the Members of the Company will be obtained in the ensuing Annual General Meeting, to authorize the Board of Directors of the Company, to fix the remuneration of Auditors for the financial year 2015-16.

SECRETARIAL AUDITORS

M/s Chandrasekaran Associates, Practicing Company Secretaries, New Delhi were appointed as Secretarial Auditors of the Company for carrying out Secretarial Audit for the financial year 2014-15. In terms of Section 204 of the Companies Act, 2013 and Rules made thereunder, they have issued Secretarial Audit Report for the financial year 2014-15 and the same is annexed to this Report.

38.1 Management''s Comments on the Auditors'' Report

The Joint Statutory Auditors of the Company have given an unqualified report on the financial statements of the Company for the financial year 2014-15. However, they have suggested that Internal Control System needs to be further strengthened. The Management''s Reply to the observations / advice are submitted as under:

Observation of Joint Statutory Auditors Management''s Reply

Point (iv) of Annexure to the Independent Auditors'' Report referred in Paragraph 1 under ''Report on Other Legal and Regulatory Requirements'' Section of Independent Auditors'' Report on Standalone & Consolidated Financial Statements

In certain areas internal control needs further strengthening Continuous efforts are being made to further strengthen the like monitoring and supervision of loans given to various internal control in the said areas. SEBs/ DISCOMs/ TRANSCOs/ GENCOs including obtaining search reports for charges created against the loans given and physical verification of assets charged to REC as security after Commercial Operations Date.

Emphasis of Matter Paragraph in Consolidated Financial Statements

In respect of one of the subsidiaries in the Group, REC The observation, as already referred to by the auditors, Power Distribution Company Limited, attention is drawn pertains to one of our subsidiaries, REC Power Distribution that adequate confirmations from receivables have not Company Limited. Efforts shall be made to streamline the been obtained. However, our opinion is not modified in this process of obtaining confirmations from the receivables by respect. the subsidiary. However, the proportion of receivables of the subsidiary to the total assets of the Group including its jointly controlled entity is just 0.0004%.

The Secretarial Auditors of the Company have given their report for the financial year 2014-15 and have made certain observations relating to composition of the Board and its Committees. The Management''s Reply to the observations are submitted as under:

Observation of Secretarial Auditors Management''s Reply

1. The Company has not complied with the provision REC is a Government Company and as per provisions of of Section 149 of the Companies Act 2013, read Article 82 of Articles of Association of the Company, the with Clause 49 of the Listing Agreement in respect power of appointment of Directors on the Board of the of appointment of requisite number of Independent Company is vested with the President of India, acting Directors on the Board, including Woman Director. through administrative Ministry. The Company has requested the Ministry of Power, Government of India to

2. The Company has not complied with the provision appoint requisite number of Independent Directors on the of Section 177/178 read with the Clause 49 of the Board of the Company including a Woman Director and the Listing Agreement in respect of composition of Audit same is under process. Committee and Nomination and Remuneration Committee. Once the requisite number of Independent Directors including a Woman Director is appointed by the President of India, the Company would be in compliance with the provisions of the Companies Act 2013, Listing Agreement and DPE Guidelines on Corporate Governance for CPSEs relating to composition of Board and its Committees.

39. COMMENTS OF C&AG OF INDIA

The Comptroller and Auditor General (C&AG) of India, through letters dated July 30, 2015 has given ''Nil'' Comments on the Audited Financial Statements (Standalone & Consolidated) of the Company for the year ended March 31, 2015 under Section 143 (6) (a) of the Companies Act, 2013. The Comments of C&AG for the financial year 2014-15 have been placed along with the report of Statutory Auditors of the Company elsewhere in this Annual Report.

40. DEBENTURE TRUSTEES

In compliance to the requirements of Debt Listing Agreement, the details of Debenture Trustees appointed by the Company, for different series of Bonds issued by the Company, from time to time, is annexed to this report.

41. STATUTORY DISCLOSURES

a) There was no change in the nature of business of the Company during the financial year 2014-15.

b) The Company has not accepted any public deposits during the financial year 2014-15.

c) No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

d) The Company maintains an adequate system of Internal Controls including suitable monitoring procedures, which ensure accurate and timely financial reporting of various transactions, efficiency of operations and compliance with statutory laws, regulations and Company policies. For details, please refer to the ''Management Discussion and Analysis Report'' annexed to this report.

e) Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided by a company engaged in the business of financing of companies or of providing infrastructural facilities in the ordinary course of its business are not applicable to the Company, hence no disclosure is required to be made. Further, the details of investments are given at Note no. 10 of Notes to Accounts to standalone financial statements.

f) Since the provisions of Section 197 of the Companies Act, 2013 and Rules made thereunder are not applicable to Government Companies, no disclosure is required to be made.

g) There are no material changes and commitments, affecting the financial position of the Company which has occurred between the end of the financial year i.e. March 31, 2015 and the date of this report.

h) The Company has not issued any stock options to the Directors or any employee of the Company.

42. NEW CORPORATE OFFICE BUILDING AT GURGAON

As the activities of REC has increased manifold during the last decade, REC is facing acute shortage of office space in present office at SCOPE Complex. REC had requested Haryana Urban Development Authority (HUDA) & New Okhla Industrial Development Authority (NOIDA) in year 2004, to allot a plot for construction of its corporate office. Accordingly, HUDA, Gurgaon had allotted an Institutional plot measuring 4.21 acre in Sector-29, Gurgaon in the year 2006. Now, REC has taken up construction of its new Corporate HQ Building at the allotted institutional plot in Gurgaon since April, 2015, which is expected to be completed in next three years.

Proposed Office Building of REC has been designed as economical, well-engineered, Bio-Climatic Building that responds to the effects of climate on the building form to evolve its shape to reduce urban heat island effect. The building is planned to have open porous & bio-climatic façade, landscape integrated work environment and healthy workspaces which includes ergonomically designed furniture, re-adjustable partitions, finish free white concrete ceiling, high recycled content products and movable services in access floor system. Radiant cooling of slab is designed to reduce system load, power consumption, water consumption and carbon footprint.

The building is also designed for 100% waste water recycling, full site rain water harvesting using 6 Million litre storage tank at 3rd basement and use of drip irrigation network for landscape. Building complex is also having provision for an auditorium having 400 seating capacity.

To comply with the directives of Government of India regarding GRIHA rated building and requirement of HUDA, a 964 kWp solar pergola will also be installed at roof top of the building to utilize renewable energy resources.

43. STATUTORY AND OTHER INFORMATION REQUIREMENTS

Information required to be furnished as per the Companies Act, 2013, Listing Agreement executed with Stock Exchanges and other statutory provisions is annexed to this report as under:

Particulars Annexure

Management Discussion & Analysis Report I

Report on Corporate Governance II

Auditors Certificate Corporate Governance III

Business Responsibility Report IV

Secretarial Audit Report issued by the Secretarial Auditors of the Company V

Annual Report on CSR activities VI

Extract of Annual Return VII

Particulars of Contracts or Arrangements with Related Parties VIII

Details of Debenture Trustees appointed by the Company for different Bonds Series IX

44. ACKNOWLEDGEMENTS

The Directors are grateful to the Government of India particularly the Ministry of Power and Ministry of Finance, the NITI Aayog and the Reserve Bank of India for their continued co-operation, support and guidance in effective management of the Company''s affairs and resources.

The Directors thank the State Governments, State Electricity Boards, State Power Utilities and other Borrowers for their continued support and trust in the Company.

The Directors also place on record their sincere appreciation for the continued support and goodwill of the esteemed Shareholders, Investors in REC Bonds, domestic and overseas Banks, Life Insurance Corporation of India, KfW of Germany and JICA of Japan in the fund raising programmes of the Company.

The Directors also thank M/s Raj Har Gopal & Co. and M/s P.K. Chopra & Co., Joint Statutory Auditors, M/s Chandrasekaran Associates, Secretarial Auditors and the Comptroller & Auditor General of India for their valued contribution.

The Directors also sincerely appreciate and thank all the employees of the Company for their valuable contribution and dedicated efforts in steering the Company to excellent performance for yet another year in succession.

For and on behalf of the Board of Directors

(Rajeev Sharma)

Chairman & Managing Director

(DIN: 00973413)

New Delhi

August 7, 2015


Mar 31, 2014

The Shareholders,

The Directors have pleasure in presenting the Forty Fifth Annual Report together with the Audited FINANCIAL Statements of your Company for the financial year ended March 31, 2014.

1. PERFORMANCE HIGHLIGHTS

1.1 The HIGHLIGHTS of performance of the Company for the financial year 2013-14 were as under with comparative position of previous year''s performance:-

(Rs. in crore)

Parameter 2013-14 2012-13

LOANS sanctioned (excluding sanctions under RGGVY & DDG) 70,739.48 79,470.49

Disbursements (including subsidy under RGGVY & DDG) 37,969.99 40,183.06

Recoveries (including interest) 30,755.36 26,728.86

Total Operating Income 17,017.98 13,537.37

profit before tax 6,531.12 5,163.95

profit after tax 4,683.70 3,817.62

1.2 FINANCIAL Performance

The total operating income of your Company for the financial year 2013-14 increased by 26% to Rs. 17,017.98 crore from Rs. 13,537.37 crore during the previous year. The profit after tax increased by 23% to Rs. 4,683.70 crore from Rs. 3,817.62 crore for the previous year.

Loan asset book of your Company as on March 31, 2014 has increased by a healthy 17% to reach a historic high of Rs. 1,48,641 crore from Rs. 1,27,356 crore in the previous year. The outstanding borrowings as on March 31, 2014 were Rs. 1,26,240 crore.

Earnings Per Share (EPS) for the financial year ended March 31, 2014 was Rs. 47.43 per share of Rs. 10/- each. Net worth of the Company as on March 31, 2014 has increased by 18% to Rs. 20,669.46 crore from Rs. 17,454.38 crore in the previous year.

1.3 Dividend

In addition to interim dividend of Rs. 7.75 per share paid on February 28, 2014, the Board of Directors of your Company have recommended a final dividend of Rs. 1.75 (One Rupee and Seventy five paisa only) per share (on the face value of Rs. 10/- each) for the financial year 2013-14, which is subject to approval of the Shareholders in the 45th Annual General Meeting. The total dividend for the financial year 2013-14 will work out to Rs. 9.50 (Rupees Nine and Fifty Paisa only) per share (on the face value of Rs. 10/- each), representing 95.00% of the paid-up share capital of the Company, as against Rs. 8.25 per share, representing 82.50% of the paid-up share capital of the Company, in the previous year. The total dividend pay-out for the financial year will amount to Rs. 938.09 crore (excluding dividend DISTRIBUTION tax of Rs. 159.40 crore).

1.4 Share Capital

The issued and paid up share capital as on March 31, 2014 was Rs. 987.46 crore divided into 98,74,59,000 equity shares of Rs. 10/- each against the Authorized Share Capital of Rs. 1,200 crore. During the financial year 2013-14, the President of India disinvested/sold 1,14,38,782 (One Crore Fourteen Lakh Thirty Eight Thousand Seven Hundred Eighty Two only) equity shares i.e. 1.16 % of total paid up capital of your Company through CENTRAL Public Sector Enterprises Exchange Traded Fund (CPSE ETF).

The President of India holds 65.64% of the paid up equity share capital as on March 31, 2014 as against 66.80% as on March 31, 2013.

1.5 The Companies Act, 2013

The Ministry of Corporate Affairs (MCA) has notifed various sections of the Companies Act, 2013 in tranches in September 2013 and March 2014 with majority of the sections as well as rules being notifed in March 2014. The Companies Act, 1956 continues to be in force to the extent of the corresponding provisions of the Companies Act, 2013 which are yet to be notifed. MCA vide its Circular dated April 4, 2014 has clarifed that the financial statements and documents annexed thereto, auditor''s report and board''s report in respect of financial year that have commenced earlier than April 1, 2014 shall be governed by the provisions of the Companies Act, 1956 and in line with the same, the Company''s financial statements, auditor''s report and Board''s report and attachments thereto have been prepared in accordance with the provisions of the Companies Act, 1956. With respect to OTHER provisions of the Act, appropriate references have been made in this report to the extent these provisions have become applicable effective April 1, 2014.

2. LOANS SANCTIONED

Your Company sanctioned LOANS worth Rs. 70,739.48 crore during the financial year 2013-14, as against Rs. 79,470.49 crore in the previous year, excluding sanctions under Rajiv GANDHI Grameen VIDYUTIKARAN Yojana (RGGVY) and DeCENTRALised Distributed Generation (DDG). The state and category-wise break-up of LOANS sanctioned during the financial year are given in enclosed Table -1 and 2 respectively. The cumulative amount of sanctions made since inception up to March, 31 2014 was Rs. 5,54,586.76 crore, including subsidy under RGGVY and DDG project cost (capital subsidy and loan) upto XI five year plan only. The cumulative state-wise position of sanctions up to the end of financial year 2013-14 is given in enclosed Table-3.

3. DISBURSEMENTS

A total sum of Rs. 37,969.99 crore was disbursed during the financial year 2013-14 as against Rs. 40,183.06 crore in the previous year including subsidy under RGGVY and DDG. The cumulative amount disbursed since inception up to March 31, 2014 was Rs. 2,40,694.10 crore excluding subsidy under RGGVY and DDG. The state-wise disbursements and repayment of loan by borrowers during the year together with cumulative fgures and outstandings as on March 31, 2014 are given in enclosed Table-4.

4. RECOVERIES

4.1 The amount due for recovery including interest during the financial year 2013-14 was Rs. 31,312.57 crore as compared to Rs. 26,881.04 crore during the previous year. The Company recovered a total sum of Rs. 30,755.36 crore during the year 2013-14 against Rs. 26,728.86 crore during the previous year. The overdues from defaulting borrowers as on March 31, 2014 were Rs. 993.04 crore. The Recovery Rate for the FINANCIAL year 2013-14 was 97.90%.

4.2 Your Company''s Non-Performing Assets (NPAs) continue to be at low levels. As on March 31, 2014, the Gross NPAs of the Company remained unchanged at Rs. 490.40 crore due to which the percentage of NPA as a percentage of Gross Loan Assets declined / decreased to 0.33% as on March 31, 2014 as compared to 0.39% as on March 31, 2013. The net NPA as on March 31, 2014 is Rs. 353.54 crore, which is 0.238% of Gross Loan Assets.

5. FINANCIAL REVIEw 5.1 Summary of FINANCIAL Results

The summary of audited financial results of the Company for the financial year ended March 31, 2014 is given as under:

(Rs. in crore)

Particulars Standalone Consolidated

2013-14 2012-13 2013-14 2012-13

Revenue from Operations 17,017.98 13,537.37 17,122.21 13,570.06

OTHER Income 102.82 61.30 106.73 68.64

Total Income 17,120.80 13,598.67 17,228.94 13,638.70

Finance Costs 10,038.46 8,083.76 10,034.74 8,083.39

OTHER Operating Expenses 239.20 220.28 264.90 237.86

Allowances against Loan Assets 312.02 130.68 312.59 131.24

Total Expenses 10,589.68 8,434.72 10,612.23 8,452.49

profit before tax 6,531.12 5,163.95 6,616.71 5,186.21

Provision for Taxation 1,847.42 1,346.33 1,875.46 1,353.43

profit After Tax 4,683.70 3,817.62 4,741.25 3,832.78

5.1.1 Contribution to National Exchequer

During the financial year 2013-14, the Company contributed an amount of Rs. 2,424.27 crore as compared to Rs. 2,164.25 crore in the previous year to National Exchequer in the form of payment of Dividend to the Government of India against its holding in the Company, Direct Taxes, Dividend Tax and Service Tax, as detailed below:

(Rs. in crore)

Particulars 2013-14 2012-13

Dividend paid to the GoI 610.14 610.14

Direct Taxes 1,640.42 1,376.21

Dividend Tax* 155.20 148.16

Service Tax 18.51 29.74

Total 2,424.27 2,164.25

*Includes dividend tax on final dividend for the previous year, paid during the current year and on interim dividend for the current year.

5.1.2 Ratio Analysis

A comparative statement of important ratios of the Company for the financial year 2013-14 vis-à-vis 2012-13, is as below:

Particulars 2013-14 2012-13

Earnings per Share (Rs. ) 47.43 38.66

Return on Average Net Worth (%) 24.57 23.85

Book Value per Share (Rs. ) 209.32 176.76

Debt to Equity Ratio (times) 6.11 6.18

Price Earnings Ratio (times)* 4.84 5.39

Interest Coverage Ratio (times) 1.65 1.64

* Price Earnings Ratio has been calculated on the basis of closing share price of REC at NSE as on March 31, 2014 and March 31, 2013.

5.2 RESOURCE Mobilization

Your Company mobilized Rs. 36,934.37 crore from the market during the financial year 2013-14 for its operational requirements. This includes Rs. 17,403 crore through issue of Institutional Bonds, Rs. 6,000 crore (Rs. 1,500 crore through private placement and Rs. 4,500 crore through public issues) raised by way of Tax Free Secured Redeemable Non-convertible Bonds u/s 10(15) (iv) (h) of the Income Tax Act, 1961.The Company raised Rs. 5,349.91 crore by way of Capital Gains Tax Exemption Secured Redeemable Non-convertible Taxable Bonds, under Section 54EC of the Income Tax Act, 1961. Further, Rs. 4,986.16 crore was mobilised through Commercial Paper (CP) and Rs. 1,195 crore through Term LOANS. The Company also raised Rs. 1,780.28 crore by way of External Commercial Borrowings and Rs. 220.02 crore by way of Offcial DEVELOPMENT Assistance (ODA) loan from KreditanstaltfürWiederaufbau (KfW), Germany & Japan INTERNATIONAL Cooperation Agency (JICA), Japan.

Utilization of proceeds of Tax Free Bonds

Your Company mobilised Rs. 6,000 crore from the market during financial year 2013-14 by way of Tax Free Secured Redeemable Non-convertible Bonds u/s 10(15)(iv)(h) of the Income Tax Act, 1961 (Rs. 1,500 crore through private placement and Rs. 4,500 crore through public issues). The entire proceeds of the fund mobilised through these bonds was utilised for lending and OTHER operational BUSINESS of the Company.

External Commercial Borrowings

Your Company mobilized USD 285 million (Rs. 1,780.28 crore) as Term Loan from INTERNATIONAL markets during the financial year 2013-14.

Cash Credit Facilities

Your Company has an approved cash credit/WCDL limit of Rs. 5,000 crore for availment from various banks for its day to day operations.

5.3 Domestic and INTERNATIONAL Credit Rating

Domestic

During the financial year 2013-14, the domestic debt instruments of REC continued to enjoy "AAA" rating – the highest rating assigned by CRISIL, CARE, India Ratings & Research and ICRA Credit Rating Agencies.

INTERNATIONAL

Your Company enjoys INTERNATIONAL credit rating from INTERNATIONAL Credit Rating Agencies Moody''s and Fitch which are "Baa3" and "BBB-" respectively equivalent to sovereign rating of India. "Baa3" rated obligations denote moderate credit risk and "BBB-" rated obligations denote that expectations of default risk are currently low.

5.4 Cost of borrowing

The overall weighted average annualized cost of funds raised during the financial year 2013-14 was 8.48% p.a. and Interest Coverage Ratio was 1.65. As a result your Company was able to deliver debt fnancing at competitive rates.

5.5 Redemption and Pre-Payment

During the financial year 2013-14, the Company repaid a total sum of Rs. 18,005.79 crore which includes Rs. 6,216.32 crore to Institutional Bondholders, Rs. 5,043.89 crore to Bondholders of Capital Gains Tax Exemption Secured Redeemable Non- convertible Taxable Bonds u/s 54 EC of Income Tax Act, 1961, Commercial Paper of Rs. 3,705 crore and Term LOANS of Rs. 2,739.40 crore to Banks / FINANCIAL Institutions. Further, the Company repaid Rs. 7.22 crore of loan to Government of India and Rs. 293.96 crore of Offcial DEVELOPMENT Assistance (ODA) loan.

5.6 Deployment of RESOURCEs at the close of the year

At the close of the financial year 2013-14, the total RESOURCEs of your Company stood at Rs. 1,52,852.90 crore. Out of this, Equity Share Capital contributed Rs. 987.46 crore, reserves and surplus stood at Rs. 19,682.00 crore, LOANS from FINANCIAL Institutions, Commercial Banks and market borrowings through Bonds and Commercial Papers accounted for Rs. 1,26,240.19 crore, Deferred Ta x Liabilities of Rs. 173.69 crore and OTHER liabilities & provisions stood at Rs. 5,769.56 crore. These funds were deployed as Long / Short Term LOANS of Rs. 1,48,504.24 crore (net of allowances Rs. 136.86 crore), fixed assets (net of depreciation) of Rs. 81.83 crore (including Capital Work in progress & Intangible Assets under DEVELOPMENT), Investments of Rs. 1,707.79 crore, Cash & Bank Balances of Rs. 1,192.94 crore and OTHER assets of Rs. 1,366.10 crore.

5.7 POLICY Initiative

Your Company constantly reviews and revises its lending and operation policies/ procedures to suitably align with market requirements as also with its corporate objectives. During the year, the Company has reviewed policies related to Grading of State POWER Utilities, Standardization of repayment periods for T & D schemes, RENEWABLE Energy Guidelines and CSR POLICY to align itself with prevailing practices and to comply with guidelines issued by Statutory Authorities from time to time.

Inspite of growing competition in the market as well as concerns on account of factors like high government borrowings, increase in interest rates as per RBI POLICY, rise in infation etc., your Company has been able to maintain healthy spreads, balancing its objectives of BUSINESS growth and profitability during the year.

5.8 Status of Rescheduled LOANS

The details of LOANS rescheduled during the financial year 2013-14 are as under:

(Rs. in crore)

Particulars 2013-14 2012-13

Standard LOANS Rescheduled* No. of Borrowers 18 14

Amount Outstanding 32,231.84 22,429.59

Sub-Standard LOANS Rescheduled No. of Borrowers 0 0

Amount Outstanding 0 0

Doubtful LOANS Rescheduled No. of Borrowers 0 0

Amount Outstanding 0 0

Total No. of Borrowers 18 14

Amount Outstanding 32,231.84 22,429.59

*The Rescheduled loan amount includes Rs. 9,949.38 crore wherein the first repayment date was extended due to delayed commissioning of the respective project.

6. PRESENT DISTRIBUTION SCENARIO AND MAJOR ChAllENGES

The present scenario of Transmission and DISTRIBUTION (T&D) industry is much more challenging in comparison to the past, since we achieved highest ever Generation Capacity addition during XI five year plan and have further set a target for addition of anOTHER 88000 MW during XII five year plan. The transfer of such magnitude of POWER from generating facilities to sub-stations/lines upto consumer end, needs a reliable & efficient system.

T&D system basically comprises of transmission lines (inter-state and intra-state), Sub-stations, switching stations, sub transmission network, DISTRIBUTION transformers and lines etc. of various voltage levels. DISTRIBUTION has been identified as the weakest link in the POWER value chain and most diffcult to deal with, due to various inherent issues. The ever increasing demand for affordable, reliable and QUALITY POWER by various classes of consumers makes DISTRIBUTION all the more challenging task. Your Company has always strived to play an active role in creation of new infrastructure and augmentation/ strengthening of the existing ones. Your Company encourages the DISCOMs to expedite various reform measures and to adopt best practices including modernization and automation of systems, smart grid, IT-enabling of systems for metering and consumer services, OTHER TECHNOLOGY interventions in the DISTRIBUTION sector & helps them in improving their operational and financial performance. Since DISTRIBUTION is the gateway for all revenue coming into the POWER sector, it plays a pivotal role in DEVELOPMENT and sustainability of the POWER sector.

Major challenges presently being faced by DISTRIBUTION sector includes accumulated losses of most of the DISCOMs across the country & their poor net worth, which is severely hindering their finances. High AT&C losses, delay in tariff order etc., has resulted in creation of regulatory assets. The utilities are also facing the financial defcit because of delay in truing ups, realisation of carrying cost, release of subsidy by State Government, revenue collection cycle etc. The overall performance of the state DISTRIBUTION utilities has been an issue of concern due to the above factors. Keeping in tune with the times and dynamic environment wherein utilities are struggling and striving hard to meet the consumer expectation, your Company today finances entire gamut of DISTRIBUTION projects broadly with the objectives of system improvement & augmentation, loss reduction measures, IT-enabling, consumer satisfaction etc. Your Company is always ready to meet any special dispensation/requirements of DISCOMs based on the prudence/merit and sound appraisal mechanism. A dedicated Strategic Management Group has been set up in the Company for this purpose.

It gives me immense pleasure to inform you that your Company is playing a pivotal role in partnering with Ministry of POWER (MoP), Government of India (GoI) in its major initiatives and its committed to improve and turn around the POWER DISTRIBUTION sector in the country, by its involvement in programmes like RGGVY (Nodal Agency), Restructured Accelerated POWER DEVELOPMENT and Reforms Programme (R-APDRP), National Electricity Fund (Nodal Agency), FINANCIAL Restructuring Plan (FRP), Smart Grid task force etc. With all these major interventions your Company is optimistic that DISTRIBUTION scenario would be much better in not too distant FUTURE when the results and effect of above massive programmes in conjunction with the reforms measure by the respective states starts trickling in and transform the entire land scape of DISTRIBUTION.

6.1 Major reforms in Distribution sector

Government of India has made all efforts to intervene in the sector for ensuring overall DEVELOPMENT by way of Electricity Act, 2003 and various OTHER POLICY measures such as National Tariff POLICY, National Electricity POLICY, RURAL ELECTRIFICATION POLICY etc., to provide a comprehensive framework and also the blueprint for POWER sector reforms. The sector has shown signs of improvement in operational and financial performance during last few years which have still to go a long way. The process of un- bundling, corporatisation, instituting regulatory commission etc., has already been completed in most of the states, thus providing accountability and more autonomy to the DISCOMs. Further some of the DISCOMs have gone AHEAD with appointment of franchisees on case to case basis in order to improve operational effciency in a Specific area.

In the past decade, GoI through Ministry of POWER has launched several programmes to extend the benefits to these ailing DISCOMs such as APDRP with an objective to strengthen the infrastructure and to reduce the losses, RGGVY to ensure last mile connectivity and to release service connections to all RURAL households living below poverty line, R-APDRP for undertaking improvements in urban pockets and to introduce IT enabling of DISTRIBUTION systems, NEF- Interest Subsidy Scheme to promote capital investment & expedite the reform process in DISTRIBUTION sector and FINANCIAL Restructuring Plan (FRP) to restructure LOANS, to provide liquidity to the DISCOMs with joint participation of CENTRAL & State Government.

In a major initiative, Ministry of POWER (MoP) has come up with Integrated Rating System for all the state DISCOMs in the country which would facilitate realistic assessment of their performance. This would enable these DISCOMs to weigh their strength & weakness and shall facilitate a focused approach for achieving further improvements in their operational and financial performance. It will also aid in adoption of consistent approach by Banks/FIs while considering funding proposals of DISTRIBUTION companies.

REC has been providing counterpart funding for a large number of R-APDRP projects which aim to reduce the Aggregate Technical and Commercial (AT&C) losses considerably in urban areas. To further expedite the reforms process GoI has recently launched National Electricity Fund (NEF) - Interest Subsidy Scheme which will act as catalyst for incentivising capital investment in POWER DISTRIBUTION infrastructure. MoP is also working towards ensuring technological intervention through introduction of Smart Grid and has already extended financial assistance to several pilot projects. The information & communication TECHNOLOGY in POWER DISTRIBUTION Sector shall enable the system to become "SMART" & availability of near-real-time information will facilitate utilities to manage the entire system. The SMART system will help inactively sensing and responding to dynamics of POWER demand & supply and QUALITY of POWER. Similarly, the information will enable the consumers to manage their energy use to meet their needs more effectively. DEVELOPMENT of intelligent grid at local DISTRIBUTION level shall be crucial for ensuring efficient & seamless fow of POWER up to last mile by embedding IT/Internet/ Communication Technologies in the existing grid for data acquisition on real time and supervisory CONTROL throughout the network. This will include integrated communication system, sensing and measurement TECHNOLOGY, advanced components for CONTROL & determining electrical behaviour & online management of the grid up to DISTRIBUTION Transformer level and eventually up to consumer point. The on-going R-APDRP programme will provide a stepping stone, equipping the DISCOMs to integrate with further technical advancements to make the grid smarter.

SMART grid concept is now coming into reality and to evolve a road map for IMPLEMENTATION of smart grids in India, Ministry of POWER has constituted India Smart Grid Task Force (ISGTF), an inter-ministerial group. The Smart Grid Vision and Road map for India was released in September, 2013 that provides for a framework to enable DEVELOPMENT of Smart Grid in Indian POWER sector. 14 nos Smart Grid Pilot Projects were approved by MoP with 50% GoI funding to test various functionalities in Indian Environment. The objectives of these Pilot projects are POWER QUALITY Management (PQM), providing Advanced Metering Infrastructure (AMI), Outage management (OM), Peak Load Management (PLM) and also DG (Distributed Generation) & Micro Grid functionalities. AMI is functionality opted by most of the utilities. Smart Grid knowledge centre is being setup and also National Smart Grid Mission is under finalization. With these initiatives, I am sure that DISCOMs will defnitely be benefited and there will be improvement in their performance.

Government of India, Ministry of POWER has notifed FINANCIAL Restructuring Plan for State Owned DISCOMs. The scheme was initially valid up to December 31, 2012 and was further extended up to July 31, 2013. The scheme is available to all participating States Owned DISCOMs having accumulated losses and facing diffculty in fnancing operational losses. Under the scheme 50% of the outstanding short term liabilities (STL) up to March 31, 2012 will be taken over by State Governments. This shall be first converted into bonds to be issued by DISCOMs to participating lenders, duly backed by State Government Guarantee. Further, State Government shall take over this liability in the next 2-5 years by way of special securities and restructuring of balance 50% Short Term LOANS shall be issued by the lenders by re-scheduling LOANS and providing moratorium on principal on the best possible terms for this re- structuring to ensure viability of this effort. The re- structuring of loan is accompanied by concrete and measurable actions by the DISCOMs / State Government and shall defnitely improve the operational performance and cash fow of DISTRIBUTION utilities. The states of Haryana, Rajasthan, Uttar Pradesh, Tamilnadu and Andhra Pradesh have already taken advantage of FRP.

With all above measures, GoI is basically working on two different fronts i.e, one to provide POWER to all and second to improve operational & financial performance of the utilities by extending reform based incentives. The results of these measures have already started to show effect in terms of timely notifcation of tariff by regulator in many states, fling of MYT petitions, claiming of Return on Equity in the ARR, release of revenue subsidy by State Government, finalisation of annual accounts etc.

The operational performance of the utility in terms of availability of systems shall improve by providing metering upto DISTRIBUTION transformer level for better energy accounting resulting in reduction of commercial losses. Further, segregation of feeders will ensure reliable POWER to RURAL households as well as agriculture.

6.2 National Electricity Fund

Your Company is the Nodal Agency for National Electricity Fund (NEF) - Interest Subsidy Scheme notifed by Ministry of POWER, Government of India to provide interest subsidy on LOANS disbursed to the DISTRIBUTION Companies (DISCOMs) – both in public and private sector, to improve the infrastructure in DISTRIBUTION sector. The scheme is aimed to incentivize much needed investment into DISTRIBUTION. The scheme is reform linked and interest subsidy is payable to the DISCOMs on achievement of reforms based parameters outlined in NEF guidelines issued by MoP in July, 2012. This interest subsidy (3% to 7%) would be provided on LOANS taken by private and public POWER utilities in DISTRIBUTION sector for all DISTRIBUTION Sector Infrastructure capital works, not covered under on-going Government Programmes like R-APDRP or RGGVY schemes.

Under NEF, interest subsidy aggregating to Rs. 8,466 crore spread over 14 years for loan disbursement amounting to Rs. 25,000 crore for DISTRIBUTION schemes sanctioned during 2 years viz., 2012-13 and 2013-14 shall be provided. Your Company during financial year 2012-13 & 2013-14 has exceeded the target of sanctioning Rs. 25,000 crore proposals and has issued sanctions to 25 DISCOMs in 14 states for taking benefits under NEF. The respective state DISCOMs will start taking benefits of (3-7%) subsidy on interest rate based on their achievement mainly on two major effciency benchmark parameters i.e., reduction of AT&C losses & reduction in revenue gap (ACS & ARR).

7. FINANCING ACTIVITIES

Your Company has been providing funding assistance for POWER generation, transmission & DISTRIBUTION projects besides for ELECTRIFICATION of villages. Details of major fnancing activities during the financial year 2013-14 are as under:

7.1 Generation

During the financial year 2013-14, your Company sanctioned 23 nos. of generation/R & M LOANS including 9 nos. of additional loan assistance with total financial outlay of Rs. 28,723.50 crore including consortium fnancing with OTHER financial institutions and has disbursed Rs. 12,852.44 crore against the ongoing generation projects.

The sector wise break up of LOANS sanctioned including additional loan assistance is as under:

(Rs. in crore)

Particulars No. of LOANS Loan Amount

STATE SECTOR

Fresh Loan 8

22,452.83 Additional Loan 3

PRIVATE SECTOR

Fresh Loan 6

6,270.67 Additional loan 6

Total 23 28,723.50

7.2 RENEWABLE Energy

During the financial year 2013-14, your Company sanctioned loan assistance of Rs. 295.48 crore to 6 new, grid- connected RENEWABLE Energy projects with installed generation capacity aggregating 98 MW which included 3 Solar photo-voltaic projects of 75 MW; 2 Small Hydro Projects of 21 MW; and 1 Wind project of 2MW.

The total cost of these projects aggregates to Rs. 993.08 crore. During the year, total disbursement was Rs. 134.99 crore for RENEWABLE Energy as detailed below:

Assistance to RENEWABLE Energy Projects (Grid-Connected) Unit FINANCIAL Year FINANCIAL Year 2013-14 2012-13

No of Projects Sanctioned Nos. 6 11

Capacity of Sanctioned Projects MW 98 126.6

Cost of Projects Rs. Crore 993.08 1,824.75

Loan Sanctioned Rs. Crore 295.48 580.06

Loan Disbursed Rs. Crore 134.99 240.505

7.3 Transmission & DISTRIBUTION

Your Company continued to play an active role in creation of new infrastructure and improvement of the existing ones under the transmission and DISTRIBUTION network in the country under its T&D portfolio. In line with the GoI''s objective to provide POWER for all by creation of infrastructure and also to reduce the AT&C losses, your Company has been fnancing schemes for expansion and strengthening of the transmission network and more importantly, modernizing the DISTRIBUTION system.

During the financial year 2013-14, your Company sanctioned 987 nos. of Transmission and DISTRIBUTION schemes involving a total loan assistance of Rs. 32,014.99 crore and has disbursed Rs. 10,789.09 crore against transmission and DISTRIBUTION projects. This includes primary POWER evacuation schemes associated with generating plants, system improvement schemes including R-APDRP projects, feeder segregation schemes, bulk loan schemes, intensive ELECTRIFICATION schemes and pump set energisation schemes.

The state-wise and category-wise details of the projects sanctioned are as per Table 1 & 2 respectively. The major programmes covered by your Company under T&D sanctions in brief are as under:

7.3.1 System Improvement & Bulk loan

To overcome the system defciencies and to improve the QUALITY and reliability of POWER supply, REC finances System Improvement schemes, based on system studies of an electrical DISTRIBUTION network considering present status of system capacities, connected demand, voltage profles and level of losses, together with scope for FUTURE load growths.

The system improvement programme also includes Bulk loan schemes meant for procurement and installation of meters, transformers, capacitors etc., HVDS schemes meant for conversion of LVDS to HVDS so as to improve the HT:LT ratio. System Improvement schemes reduce the AT&C losses to a great extent.

During the financial year 2013-14, a total of 837 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs. 30,307.37 crore. This included: (i) 107 schemes involving a loan assistance of Rs. 4,948.88 crore for fnancing investment in the DISTRIBUTION system by way of installation of essential equipments like transformers, meters, capacitors etc. (ii) 27 scheme involving a loan assistance of Rs. 2,040.33 crore for conversion of Low Voltage DISTRIBUTION to High Voltage DISTRIBUTION System (HVDS) (iii) 415 schemes for Rs. 10,365.97 crore for improving the DISTRIBUTION system (iv) 66 schemes involving loan assistance of Rs. 1,804.85 crore towards counterpart funding of part B of R-APDRP projects and (v) 222 schemes for loan assistance of Rs. 11,147.34 crore for improving the transmission network.

7.3.2 Intensive ELECTRIFICATION

Schemes under this activity mainly aim at intensive ELECTRIFICATION of already electrifed villages. During the year 2013-14, a total of 21 intensive ELECTRIFICATION schemes were sanctioned involving a loan outlay of Rs. 324.77 crore.

7.3.3 Pumpsets Energisation

REC''s loan portfolio also includes extension of loan assistance for energisation of agricultural pumpsets. During the financial year 2013-14, under REC financed schemes, 2,64,165 nos. electric irrigation pumpsets were reported to be energized. A loan assistance of Rs. 1,382.85 crore was sanctioned for 129 new schemes during the year under this category. The state wise details and cumulative position of pumpset energized up to March 31, 2014 are given in the enclosed Table-5.

7.4 Financing Activities in North Eastern States

During the financial year 2013-14, a loan assistance of Rs. 670.42 crore was sanctioned to North Eastern States for Generation schemes which include Rs. 587.67 crore to M/s Himagiri Hydro Energy Private Limited for its 4x75 MW Panan Hydro Electric POWER Project in north Sikkim and additional loan of Rs. 82.75 crore to M/s Dans Energy Limited, south Sikkim. A loan assistance of Rs. 88.80 crore was also sanctioned to M/s Teesta Valley POWER Transmission Limited for a transmission line in North Eastern states under T&D.

A total sum of Rs. 977.41 crore was disbursed during the financial year 2013-14 as against Rs. 509.78 crore in the previous year to North Eastern states for Generation projects which include Rs. 662.54 crore to M/s Teesta Urja Limited, Rs. 42 crore to M/s Lanco Energy Private Limited, Rs. 55.87 crore to M/s Dans Energy Private Limited and Rs. 217 crore to M/s Gati Infrastructure Limited. A loan assistance of Rs. 7.46 crore was also disbursed to North Eastern states under T&D schemes, during the year.

7.5 Appraisal System for Financing

REC has its own methodology for appraisal of Private Sector POWER Generation and Transmission Projects and the grading of the State POWER Utilities. REC''s interest rates are linked to the grades assigned to the private sector projects and State POWER

Utilities. REC along with PFC assists MoP in bringing out integrated ratings for State POWER DISTRIBUTION Utilities and adopts the ratings as revised by MoP from time to time to ensure uniformity in approach by various Banks/ FIs. The grading of State POWER Utilities is an on-going process based on various parameters viz., financial, technical, tariff, regulatory measures, government support and management etc.

8. INTERNATIONAL COOPERATION & DEVELOPMENT

IMPLEMENTATION of projects under the 3rd line of credit from KfW, Frankfurt, signed on March 30, 2012 for availing ODA loan of EUR 100 million for fnancing RENEWABLE Energy Projects in the areas of Wind POWER/ Small Hydro POWER/Biomass Cogeneration/ Biomass POWER/Solar PV/Solar Thermal & Energy Effciency, is under progress and cumulative amount of EUR 50 million (approx. Rs. 384.12 crore) has been drawn as on March 31, 2014.

IMPLEMENTATION of identified projects under the 2nd Line of Credit with JICA signed on March 10, 2008 for refnancing the ''Haryana Transmission System Project'' with the objective of achieving stability in POWER supply by strengthening intra- state transmission systems in the State of Haryana is under progress, and cumulative amount of JPY 10,367.39 million (approx Rs. 561.62 crore) has been drawn from JICA under this line of credit as on March 31, 2014. The loan amount under the JICA-II line of credit was revised from the initial outlay of JPY 20,902 million to JPY 13,000 million, due to excess INR amount becoming available on account of exchange rate fuctuations, as compared to estimated actual project cost requirements.

9. RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA

Government of India, launched the scheme ''Rajiv GANDHI Grameen VIDYUTIKARAN Yojana'' (RGGVY)–Scheme of RURAL Electricity Infrastructure and Household ELECTRIFICATION vide office Memorandum dated March 18, 2005, for providing access to electricity to all RURAL households. REC is the Nodal Agency overseeing the IMPLEMENTATION of the program. Under the scheme, 90% capital subsidy is being provided by Government of India for overall cost of the projects.

9.1 ELECTRIFICATION of Villages and BPl households

The initial approval was for IMPLEMENTATION of Phase-I of the scheme for capital subsidy of Rs. 5,000 crore during X five year plan period. Further, sanction for continuation of the scheme in XI five year plan was conveyed by Ministry of POWER vide office Memorandum dated February 6, 2008 with an outlay of Rs. 28,000 crore as capital subsidy. Further, an additional amount of Rs. 6,000 crore outlay was also sanctioned by MoP in XI five year plan.

Cumulatively, 648 projects covering ELECTRIFICATION of 1,11,998 un-electrifed villages and 2.75 crore BPL households costing Rs. 43,579.23 crore have been sanctioned upto March 31, 2014 by the Ministry of POWER for IMPLEMENTATION upto XI five year plan. The state-wise details are furnished at Table-6.

Continuation of the Scheme in XII and XIII five year plans was also approved by Ministry of POWER with capital subsidy of Rs. 35,447 crore, out of which Rs. 23,397 crore would be met through Gross Budgetary Support (GBS) for XII five year plan and remaining Rs. 12,050 crore from XIII five year plan.

Under XII five year plan, 273 projects covering 2,42,165 villages (12,141 un-electrifed and 2,30,024 electrifed villages) and 131.76 lakh BPL households with the total sanctioned project cost of Rs. 23,594.31 crore have also been sanctioned by the Ministry of POWER. The state-wise details are furnished at Table-7.

During the financial year 2013-14, work in 1,197 un-electrifed villages have been completed and free electricity connections to 9,61,730 BPL households have been provided. Further, during the year, RGGVY Subsidy of Rs. 2,938.52 crore was disbursed by the Ministry of POWER, Government of India, to REC. Cumulatively, works in 1,08,280 un-electrifed villages have been completed and electricity connections to 2.16 crore BPL households have been provided under the scheme up to March 31, 2014. The state-wise details are furnished at Table-8.

During this financial year, an amount of Rs. 2,686.97 crore (including subsidy of Rs. 2,394.71 crore under RGGVY and Rs. 29.26 crore under DDG subsidy) has been disbursed.

9.2 Achievement of Mou Targets of RGGVY

During the financial year 2013-14, closure of 205 nos. of projects as sanctioned in X and XI five year plans pending fulflment of condition of deployment of Franchisees has been achieved as against MoU target of 200 projects. Further, 181 nos. of DDG projects were awarded during the year, as against MoU target of 100 projects, which is 181% of the MoU target and 92 DDG projects have been commissioned during the year.

10. RGGVY- DECENTRALISED DISTRIBuTED GENERATION (DDG)

10.1 RGGVY provides grants for DDG projects from conventional or RENEWABLE non-conventional sources such as Biomass, Biogas, Micro Hydro, Wind, Solar etc. for villages where grid connectivity is either not feasible or not cost effective. In XII five year plan, DDG will also be extended to grid connected areas to supplement the availability of POWER in areas where POWER supply is less than six hours a day. Under the scheme, 90% capital subsidy is provided towards overall cost of the DDG projects under the RGGVY scheme, excluding the amount of state or local taxes, which is borne by the concerned State/ State Utility. 10% of the project cost is to be contributed by states through own RESOURCEs / loan from financial institutions. A provision of Rs. 900 crore has been kept as subsidy under XII five year plan. However, the allocation under DDG would be fexible to meet any additional requirement within the overall cost of the scheme.

10.2 The Guidelines for DDG projects under RGGVY were issued by Ministry of POWER on January 12, 2009. To extend more coverage and faster IMPLEMENTATION of DDG project and also for facilitation of DDG in Left Wing Extremism (LWE) affected districts, these guidelines were amended from time to time.

10.3 During the financial year 2013-14, in the states of Andhra Pradesh, Jharkhand, Rajasthan, Meghalaya, Karnataka, Kerala, Madhya Pradesh, Chhattisgarh and Odisha, 504 DDG projects were sanctioned for total project cost of Rs. 166.33 crore. A total sum of Rs. 31.02 crore was disbursed for DDG projects during the financial year 2013-14. Most of the states are in the process of award and IMPLEMENTATION of DDG projects. The state-wise details of DDG projects sanctioned and amount disbursed under RGGVY during the financial year 2013-14 are given below:- (Rs. in crore)

Sl. State Sanction No. No. of No. of No.of un No.of BPl Total Projects Distri -cts electrifed House- Sanctio -ned villages/ holds Project cost hamlets Covered covered

1 Andhra Pradesh 214 5 214 6,925 52.34

2 Bihar - - - - -

3 Chhattisgarh 80 3 81 3,923 24.31

4 Jharkhand 43 3 89 1,510 20.91

5 Karnataka 93 10 204 4,839 35.90

6 Kerala 15 1 15 730 5.32

7 Meghalaya 3 1 3 248 3.89

8 Madhya Pradesh 7 1 7 357 2.78

9 Odisha 7 1 7 43 1.97

10 Rajasthan 42 3 42 1,495 18.91

11 Uttarakhand - - - - -

TOTAL 504 28 662 20,070 166.33



State Disbursement Subsidy Loan Total Amount Amount Disbursement

Andhra Pradesh 8.77 0.69 9.46

Bihar 9.85 1.09 10.94

Chhattisgarh 9.35 - 9.35

Jharkhand - - -

Karnataka - - -

Kerala - - -

Meghalaya - - -

Madhya Pradesh - - -

Odisha - - -

Rajasthan - - -

Uttarakhand 1.27 - 1.27

TOTAl 29.24 1.78 31.02

11. STANDARDISATION, QUALITY CONTROL & MONITORING

Your Company has continually provided technical expertise in the DISTRIBUTION system to State POWER Utilities. The technical Specifications and construction standards issued by the Company are used extensively by the State POWER Utilities. The Company, in order to promote new technologies, has been continuously LOOKING for innovations using latest R&D in the feld of POWER DISTRIBUTION.

In line with the Three-Tier QUALITY CONTROL Mechanism for ensuring proper QUALITY of materials and works in IMPLEMENTATION of RGGVY XI five year plan schemes, (i) REC QUALITY Monitors (RQM) under Tier-II have been appointed covering 413 projects in 25 states and (ii) National QUALITY Monitors (NQMs), on behalf of Ministry of POWER, have been appointed under Tier-III for the 332 projects covering 24 states of country. Further during the financial year 2013-14, RQMs have undertaken 87 Nos. of materials inspections and 11,672 village / 33 substation inspections, and NQMs have undertaken 506 Nos. of village / 42 substation inspections for ensuring QUALITY of works.

Ministry of POWER directed REC to carry out RQM inspections in 20% villages with 100% verifcation of BPL connections in 196 projects. Earlier, 100% BPL verifcation was carried out in 2.5% villages only. For balance 17.5% villages, 6 agencies were deployed to carry out inspection of 27,385 villages in 24 states across the country covering 196 projects were identified. The assignment was targeted to complete in 6 months for plain states and 12 months for hilly states. As on March 31, 2014, the inspection calls for 26,107 villages were issued and out of which inspection in 21,830 villages has been completed.

12. PREFERRED CUSTOMER POLICY

As a part of BUSINESS promotion strategy, a Preferred CUSTOMER POLICY was formulated in 2008 with the basic purpose of offering an enhanced level of services to the Company''s CUSTOMERs and to have a long term mutually beneficial relationship

with them. The POLICY lays down the eligibility criterion which takes into account various factors, such as, amount of loan outstanding, duration of loan relationship, repayment track record of the borrower etc., for determining preferred CUSTOMERs and sponsoring them for capacity building/ domestic/ INTERNATIONAL seminars/training programmes organized by various external agencies as well as CIRE, Hyderabad.

During the financial year 2013-14, under this POLICY, participants from eight such preferred CUSTOMERs mostly from the State Utilities viz. Maharashtra State Electricity DISTRIBUTION Company Limited (MSEDCL), Mumbai, Maharashtra State Electricity Transmission Company Limited (MSETCL), Mumbai, Maharashtra State POWER Generation Company Limited (MSPGCL), Mumbai, Rajasthan Rajya Vidyut Prasaran Nigam Limited (RRVPNL), Uttar Haryana Bijli Vitaran Nigam Limited (UHBVNL), Karnataka POWER Corporation Limited (KPCL), Andhra Pradesh POWER Generation Corporation Limited (APGENCO) and UP POWER Corporation Limited (UPPCL) were sponsored by REC for 10 days training programme on "Global Best Practices in POWER Sector" held at PMI, Noida, India and also in Italy and France.

13. JOINT VENTuRE

REC, along with three OTHER PSUs, namely POWER Grid Corporation of India Limited, NTPC, and PFC as equal partners, has formed a Joint Venture Company by the name Energy Effciency Services Limited (EESL) on December 10, 2009. Your Company has contributed Rs. 22.50 crore (being 25% of paid-up capital) upto March 31, 2014.

EESL is formed to create & sustain market access of energy efficient technologies particularly in the public facilities like municipalities, buildings, agriculture, industry etc. and to implement several schemes of Bureau of Energy Effciency, Ministry of POWER, Government of India. EESL is also leading the market related activities of the National Mission for Enhanced Energy Effciency (NMEEE), one of the 8 national missions under National Action Plan on Climate Change. The BUSINESS verticals of the Company inter-alia include implementing projects in Energy Service Company (ESCO) mode in Agriculture Demand Side Management (AgDSM), Municipal Demand Side Management (MuDSM), DISTRIBUTION Energy Effciency projects, Building, Small & Medium Enterprises (SMEs), Perform, Achieve and Trade-Joint IMPLEMENTATION Plan (PAT-JIP), Corporate SOCIAL RESPONSIBILITY activities etc.

Currently, EESL is implementing Municipal Street Lighting projects with various municipal corporation and AgDSM projects for replacement of inefficient Agricultural Pump sets in agriculture Sector, DSM Based efficient Lighting Programme (DELP) in domestic residential sector in ESCO mode with various Utilities and CSR projects of various companies.

14. INFORMATION TECHNOLOGY INITIATIVES

All major BUSINESS functions of the Company including Finance, Project, Disbursements, Loan Accounts, Treasury functions, Payroll, CPF, Cash management, Banking, Purchases across all offices are done through an integrated ERP system resulting in continuous & SUSTAINABLE improvement of internal effciency and greater CUSTOMER satisfaction. The Company has extended the benefit of ERP directly to Borrower also by developing an online "Borrower Portal" to view information pertaining to their schemes. This is to facilitate the borrower in knowing status of LOANS and schemes on real time basis. This system has been implemented for DISCOMs of one state and is being extended to OTHER states on demand basis. The Company has also initiated IMPLEMENTATION of integrated HR-ERP solution for automation of entire HR functions including Employee Self Service Portal across the Company and the system will also be integrated with existing BUSINESS ERP. The IMPLEMENTATION of the project is at advanced stage for which Extensive Change Management Workshop has also been conducted across the Company.

REC has implemented Document Management System (DMS) across the Company for digitization of documents including scanning, cleaning, QC, indexing, uploading and retrieving. REC has also implemented Workfow Management System (WMS) for electronic movement of note sheet approval along with attached documents. Towards achieving efficient e-governance and transparency, the Company has implemented on-line ''E-procurement'' system for procurement of goods and services above Rs. 10 lakhs, web-based online submission of ''Annual Property Return'' etc. across the organization and Bill Payment Tracking system for tracking timely payment of bills to vendors has been implemented in selected divisions handling payments.

REC has a full-fedged Disaster Recovery Center (DRC) at CIRE, Hyderabad. Both the Primary Data Centre (PDC) and DRC are ISO/IEC 27001:2005 security standard certified.

The Company has also redesigned and revamped the existing static Corporate website to an interactive and dynamic website. Also, to make the employees IT enabled, Desktop Computers have been provided to nearly 100% employees (OTHER than Class-IV employees).

15. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION

CENTRAL INSTITUTE for RURAL ELECTRIFICATION (CIRE) was established at Hyderabad in 1979 under the aegis of REC to cater to the training and DEVELOPMENT needs of engineers and managers of POWER and Energy Sector and OTHER organisations concerned with POWER and Energy. The following programmes are conducted on subjects of POWER Generation, Transmission and DISTRIBUTION:

15.1 National Training Programmes (NTP) under RGGVY

CIRE is designated as a nodal agency by Ministry of POWER (MoP) for IMPLEMENTATION of National Training Programmes on Franchisee and employees of C&D category under the HUMAN RESOURCEs DEVELOPMENT component of RGGVY programme. The programmes are continued during XII five year plan with a target of training 1,25,000 employees of C&D category and 25,000 existing franchisees. During the year, CIRE/REC has entered into Memorandum of Agreement (MoA) with 33 POWER Utilities/Training INSTITUTEs, to train their employees of C&D category and these POWER utilities/institutions trained 26,275 employees of C&D category against the target of 25,000.

During the year, CIRE under its banner, has conducted 14 Programmes for employees of C&D category which was attended by 348 participants at various locations of POWER utilities.

15.2 R-APDRP Programme

CIRE as partner training INSTITUTE organized R-APDRP programme sponsored by Ministry of POWER. During the year, CIRE has conducted 37 R-APDRP programmes (27 for employees of A&B category and 10 for employees of C&D category) on different themes, viz. Effciency Improvement Measures in DISTRIBUTION System, Best Practices in DISTRIBUTION Operation & Management System, Communication and CUSTOMER Relations, Revenue Management & Loss Reduction, O&M of Sub- stations for Linemen and Regulatory Module with 671 participants from different POWER utilities.

15.3 INTERNATIONAL Programmes

CIRE is empanelled by Ministry of External Affairs, Government of India to organise training programmes in the area of POWER sector under ITEC/SCAAP. During the year, CIRE has organised 9 INTERNATIONAL programmes with 168 participants, on the topics, namely, Planning and Management of POWER Transmission & DISTRIBUTION Systems (8 weeks); FINANCIAL Management and Accounting System for POWER Companies (8 weeks); Best Practices in POWER DISTRIBUTION Sector (4 weeks); Planning, Appraisal and FINANCIAL Management of POWER Projects (8 weeks); Management of POWER Utilities using IT/Automated Solutions (5 weeks); Design, Erection, O&M of EHV Sub-station (4 weeks); Solar POWER Generation-Grid enabling (4 weeks); Trends and DEVELOPMENTs in Generation and Transmission System (8 weeks) and DeCENTRALised Distributed Generation & RURAL POWER DISTRIBUTION Management (8 weeks).

The participants from various countries, viz., Morocco, Sri Lanka, Bhutan, South Sudan, Malawi, Tanzania, Nigeria, Mauritius, Burundi, Uganda, Bhutan, Zimbabwe, Ethiopia, Myanmar, Gambia, Afghanistan, Kyrgyzstan, Oman, Liberia, Syria, Bangladesh, Egypt, Namibia, Algeria, Iran, Laos, Libya, Sierra Leone, etc., have attended the programmes.

15.4 Regular National Programmes

CIRE has organised 24 Regular Training Programmes with 249 participants for the personnel of various POWER Utilities/ DISTRIBUTION Companies, on different topics such as, Specifications, Standards and Construction Practices in DISTRIBUTION System; POWER Sector Accounting with reference to Indian Standards and IFRS; Pilferage of Electricity - Issues, Challenges and Remedial Measures; Protection System in Sub-stations; Earthing Practices in Electrical Installations and Safety Measures; Open Access, POWER Trading and Tariffs-ABT Scenario; POWER and DISTRIBUTION Transformers-efficient Operation & Maintenance; High Voltage DISTRIBUTION System; Supervisory CONTROL And Data Acquisition (SCADA) for POWER Utilities; Solar POWER Generation; EHT Transmission Lines-Design, Erection and O&M; Gas Insulated and Indoor Sub-stations including POWER & CONTROL Cables; O & M and Protection aspects in 33/11 KV Sub-stations; Design, O & M of Hydro POWER Plants; POWER DISTRIBUTION Management; POWER Factor Improvement-Reactive POWER Management; POWER Purchase Agreement; Tariff POLICY & ARR Submission; DISTRIBUTION System Planning with Automated Solutions and Latest Trends in Metering Billing and Technologies.

15.5 Programmes organised in collaboration

CIRE is organising training programmes in collaboration with premier Management INSTITUTE i.e. INSTITUTE of Public Enterprise and conducted 4 programmes during the financial year 2013-14, namely, Best Practices in HR Management of POWER Utilities; Materials Management, e-procurement & Contract Management; Management DEVELOPMENT Programme for POWER Sector Executives; and Total QUALITY Management with 41 participants.

15.6 Sponsored Programmes

During the financial year, 8 sponsored programmes, namely, "RGGVY Programme" for Gorkhaland Territorial Administration; "Best Practices for Loss Reduction" for Tripura SECL; "Standard Construction Practices" & "Best Practices in O&M of

Transformers" for MP Paschim Kshetra Vidyut Vitaran Company Limited, Indore, and "POWER DISTRIBUTION Management" for Punjab State POWER Corporation Limited (4 batches) were conducted by CIRE.

15.7 In-house Training Programmes

CIRE has also organised 8 in-house programmes for the employees of REC. 123 Employees have taken part in these programmes. The topics covered are: Right to Information Act; Finance for Non-finance Employees; General Management (2 batches), Project Appraisal Methodologies, ISO 9001:2008 (QMS); Technical aspects for Non-technical Executives and Hindi Workshop.

15.8 In all, during the financial year 2013-14, in addition to coordinating and monitoring the National Training Programmes for Franchisees and employees of C&D category, CIRE has conducted 105 programmes on various themes and trained 1,839 personnel with 12,725 mandays of training.

16. RISK MANAGEMENT

16.1 Asset liability Management

The Company has a Risk Management POLICY which covers Asset Liability Management POLICY and Hedging POLICY. ALM POLICY provides a framework for defning, measuring and monitoring the mismatches and Hedging POLICY covers the management of currency risk.

An Asset Liability Management Committee (ALCO) is currently functioning under the chairmanship of CMD and Director (Finance), Director (Technical), one Part-time Non Offcial Independent Director and Executive Directors & General Managers from Finance and Operating Divisions as its members.

ALCO monitors risks related to liquidity, interest rates and currency rates. The liquidity risk is being monitored with the help of liquidity gap analysis and the Committee manages the liquidity risk through a mix of strategies such as forward LOOKING RESOURCE raising program based on projected disbursement and maturity profle. The interest rate risk is monitored through interest rate sensitivity analysis and managed through review of lending rates, cost of borrowings and the terms of lending & borrowing. Foreign currency risk associated with exchange rate and interest rate is managed through various derivative instruments.

16.2 Enterprise-wide Integrated Risk Management

The Company has constituted a Risk Management Committee (RMC) which is currently functioning under the chairmanship of Part-time Non Offcial Independent Director and it comprises of Director (Finance) and Director (Technical) for monitoring the integrated risks of the Corporation. The main function of RMC is to monitor various risks likely to arise and to review the Risk Management Policies and practices adopted by the Company, and also to initiate action for mitigation of risk arising in the operation and OTHER related matters of the Company. The Company has identified its various risks and has taken appropriate steps to mitigate them. The brief description of the same is as below:

i) Credit Risk

Credit risk is a risk inherent in the fnancing industry and involves the risk of loss arising from the diminution in credit QUALITY of a borrower and the risk that the borrower will default on contractual repayments under a loan or an advance. To mitigate the same, the Company follows systematic institutional and project appraisal process to assess the credit risk. These processes include a detailed appraisal methodology, identifcation of risks and suitable structuring and credit risk mitigation measures.

ii) Market Risk:

Market risk is the potential loss arising from changes in market rates and market prices. Our primary market risk exposures result primarily from fuctuations in interest rates and foreign currency exchange rates. In order to mitigate the interest rate risk, the Company periodically reviews its lending rates based on our cost of borrowing. We then determine our lending rates based on prevailing market rates, our weighted average cost of funding and our post tax margins.

iii) liquidity Risk:

Liquidity risk is the risk of our potential inability to meet our liabilities as they become due. We face liquidity risks, which could require us to raise funds or liquidate assets on unfavourable terms. We manage our liquidity risk through a mix of strategies, including through forward-LOOKING RESOURCE mobilization based on projected disbursements and maturing obligations.

iv) Foreign Currency Risk:

Foreign currency exchange risk involves exchange rate movements among currencies that may adversely impact the value of foreign currency-denominated assets, liabilities and off-balance sheet arrangements. The Company manages foreign currency risk associated with exchange rate and interest rate through various derivative instruments. For this, the Company has put in place a Hedging POLICY to manage risk associated with foreign currency borrowings.

v) Legal risk:

Legal risk arises from the uncertainty of the enforceability of contracts relating to the obligations of our borrowers. This could be on account of delay in the process of enforcement or diffculty in the applicability of the contractual obligations. We seek to minimise the legal risk through legal documentation and forward-LOOKING contractual provisions in the legal documents.

vi) Operational Risk:

Operational risks are risks arising from inadequate or failed internal processes, people and systems or from external events. We have continually strengthened our systems and procedures to recognize and reduce operational risk in our BUSINESS.

17. ISO 9001:2008 QUALITY ASSuRANCE CERTIFICATION

Your Company has implemented QUALITY Management Systems as per ISO 9001:2008 standards in six major Divisions of Corporate office and all Zonal / Project offices across the country for claims processing.

18. HUMAN RESOURCE MANAGEMENT

In order to professionalize the Executive strength of REC and also to infuse fresh blood, 14 Executives were appointed through open advertisement and anOTHER 14 Executives through campus recruitment drawn from premier Institutions empanelled for the purpose during the financial year. The total manPOWER of the Company as on March 31, 2014 was 631 employees which includes 442 executives and 189 non-executives.

18.1 Reservation in Employment

The directives issued by the Government of India regarding reservations for SC/ST etc. in appointment and promotion to various posts were complied with. The group wise details of SC and ST employees out of total strength as on March 31, 2014, are given below:

GROuP TOTAl NO. OF EMPlOYEES SC ST

A 377 (372) 35 (34) 12 (11)

B 122 (141) 18 (19) 2 (2)

C 45 (46) 7 (8) 0 (0)

D 87 (89) 27 (27) 1 (1)

Total 631 (648) 87 (88) 15 (14)

(Figures in bracket give the corresponding position in the previous year.)

18.2 Training & HUMAN RESOURCE DEVELOPMENT

As a measure of capacity building including up-gradation of employees'' skill sets and to ensure high deliverance of performance, Training and HRD continued to receive priority during the financial year. Training and HUMAN RESOURCE POLICY of the Company aims at sharpening BUSINESS skills and competence required for better employee performance and provides all possible OPPORTUNITIES and support to the employees to improve their performance and productivity. Training is also provided to promote better understanding of professional requirements as well as to sensitize them to socio- economic and political environment in which BUSINESS is carried out. Training also helps employees benefit in health and attitudinal change process.

Based on the needs assessed and as a means to meet them, the Company sponsored 193 employees to various training programmes, workshops etc., within the country and abroad. In addition, 13 training programmes were conducted in-house which were attended by 223 employees. Taken together, these initiatives enabled the Company to achieve 1,542 training man days and also to achieve excellent rating on MoU target on this parameter. In order to enable them develop global exposure, 27 officers were deputed to various programmes abroad to countries like USA, Japan, Greece, Spain, France, Germany and Italy. In terms of MoU target, 97 executives of the Company have been imparted training on risk/general management and an expenditure of Rs. 0.22 crore has been incurred on already established chairs by REC (one at IIT- Roorkee and OTHER at G. B. Pant University of Agriculture) during the year.

18.3 Employee welfare

In order to provide improved health care facilities to the employees and their dependent family members, the Company has expanded the list of empanelled hospitals under Direct Payment Scheme by adding six additional hospitals. Further, part time services of five specialized doctors were engaged to provide on-site medical facilities to employees. The Company has also been funding sports & recreation equipments (like carrom board etc.) for use in office premises to promote health and well being of employees.

Sports Activities

During the financial year 2013-14, REC hosted an Inter-CPSU Kabaddi Tournament and also sponsored its employees for various Inter- CPSU sports tournament including but not limited to Badminton, Table Tennis and Carrom tournaments organized by various POWER sector CPSUs under the aegis of POWER Sports CONTROL Board (PSCB). Further, employees were encouraged to participate in various quiz, paper presentations and OTHER simulation competitions conducted by reputed organizations like SCOPE, POWER HR FORUM, AIMA etc., to foster a spirit of competition.

18.4 Representation of women Employees

As on March 31, 2014, the Company had 102 permanent women employees, which represent 16.16% of the total work force. There is no discrimination of employees on the basis of gender. A Women Cell has been in operation in the Company to look after welfare and all round DEVELOPMENT of women employees. The Company has a proper framework for dealing with instances relating to sexual harassment and an NGO has also been included in the Committee as per Government''s Directives. INTERNATIONAL Women''s Day was celebrated by REC Women Cell on March 8, 2014.

18.5 Industrial Relations

The Industrial Relations continued to be cordial and harmonious in the financial year 2013 -14 also. There was no loss of man days on account of industrial unrest. Regular discussions were held with REC Employees Union and REC officers Association. They were consulted on major issues affecting employee welfare. Commitment towards participative management is refected by the fact that consensus could be reached on a majority of issues. This has helped build an atmosphere of trust and cooperation resulting in the motivated workforce and continued improvement in BUSINESS performance.

18.6 Public Grievance Redressal Machinery

In accordance with the guidelines issued by the Government of India, the Company has constituted a Grievance Redressal Committee to redress the grievances of officers and staff. The scope of the committee has further been enlarged to cover Public Grievances also. One day during a week has been fixed as meetingless day to attend the grievances by the Heads of Divisions at Corporate office as well as at Zonal/ Projects offices and CIRE.

19. CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

During the financial year 2013-14, the Corporate SOCIAL RESPONSIBILITY and SUSTAINABLE DEVELOPMENT (CSR & SD) initiatives of the Company were continued with a view to integrate REC''s BUSINESS operations with SOCIAL processes while recognizing the interests of its stakeholders. CSR & SD projects were linked with the principle of SUSTAINABLE DEVELOPMENT. The strategic focus was aimed at CSR & SD initiative towards fulfilling the National Plan goals and objectives including Millennium DEVELOPMENT Goals ensuring gender sensitivity, skill enhancement, entrepreneurship and employment generation by co- creating value with local institutions/ people. While identifying such initiatives the Company has adopted an integrated approach to address the community, societal and environmental concerns measured in terms of triple bottom line approach. During the year, the Company has undertaken various CSR & SD initiatives in the felds of Skill DEVELOPMENT/ Up-gradation programmes, education, promotion of non-conventional sources of energy, promotion of Health care including for old age and persons with disabilities, drinking water and sanitation, installing Solar PV Smart Mini Grids, providing Solar- Lanterns to affected households and installation of Mobile-charging Solar Stations at various locations/ districts across the country. CSR & SD strategy has been developed with action plan in project-based accountability approach. Most of the CSR & SD activities have been implemented in project-mode, with baseline survey, specified time-frame, identified milestones and periodic monitoring. Disbursement of allocated funds under CSR & SD was linked with achievement of the milestones and deliverables. During the financial year 2013-14, under Corporate SOCIAL RESPONSIBILITY and SUSTAINABLE DEVELOPMENT, financial assistance aggregating to Rs. 66.61 crore was sanctioned and Rs. 38.40 crore was disbursed for various projects. A detailed Report on Corporate SOCIAL RESPONSIBILITY and Sustainability Activities is annexed to this Report.

20. VIGILANCE ACTIVITIES

20.1 VIGILANCE Division endeavored to optimize transparency, fairness and accountability in all operational areas. Streamlining of systems and procedures in matters relating to administrative and financial functions was also accorded priority. The thrust on leveraging of TECHNOLOGY was continued, with the result that information relating to LOANS, schemes, tenders, third party bills, recruitment etc. has been made online. A comprehensive Bill Tracking System has been implemented in Information TECHNOLOGY and Administration Division.

20.2 Tenders were scrutinized and various suggestions were given for enhancing competitiveness and fairness in purchase procedures. Wherever loopholes were noticed, the matter was taken up with concerned divisions, which led to strengthening of tender systems. In compliance of VIGILANCE Division''s suggestion for devising and operationalizing an effective system of recording/accounting of fixed assets, the procedure for reconciliation and maintenance of fixed assets has been formulated.

20.3 With a view to enhance the knowledge of employees about VIGILANCE related issues, a VIGILANCE Bulletin is being issued on a quarterly basis. The details of Immovable Property Returns (IPR) of all Executives have been uploaded on REC''s Website and VIGILANCE clearance has been linked with timely submission of IPRs. Annual Property Returns of the employees were subject to systematic scrutiny.

20.4 As per directives of CVC, REC observed VIGILANCE Awareness Week from October 28, 2013 to November 2, 2013. Various activities were organized in the Corporate office as well as at feld offices to enlist the participation of the employees at large. At the Corporate office, Quiz and Essay Writing Competitions were organized for executives as well as non-executives, and dignitaries were invited to sensitise REC employees on various facets of VIGILANCE.

20.5 Inspections and feld visits were regularly conducted by the VIGILANCE Division. Audit Reports were scrutinized from VIGILANCE point of view.

20.6 Agreed List in respect of Corporate office, Zonal office/Project offices and CENTRAL INSTITUTE for RURAL ELECTRIFICATION, Hyderabad was finalized after interaction with local branches of CBI. In compliance with the instructions of CVC, HR Division was informed of the post identified as sensitive for the purpose of rotational transfers.

20.7 Prescribed periodical statistical returns were sent to CVC, CBI, MoP on time. The performance of VIGILANCE Division was reviewed regularly by the CVC, Board of Directors and CMD in addition to constant reviews undertaken by the CVO in accordance with the prescribed norms.

21. IMPLEMENTATION OF OFFICIAL LANGUAGE

The Company excelled with reference to the targets fixed by Department of Offcial Language, Home Ministry in its Annual Programme 2013-14. In order to encourage employees, all Incentive Schemes introduced by the Government of India have been implemented in the Company. During the year, officers & Staff of the Company have shown keen interest in Hindi with the result that its usage has increased in day to day working.

To promote use of Hindi in offcial work, 8 Hindi workshops were organized in Corporate office in which 83 officers and 56 employees participated and a three days Hindi workshop was organized from August 22 to August 24, 2013 at CIRE, Hyderabad, in which 25 officers participated. A Hindi Pakhwara was organized from September 14 to September 28, 2013 in Corporate office, in which nine competitions including Hindi Quiz, were organized for employees and winners of competitions were awarded Certifcates of Merits & Cash Prizes. Further, to popularise Hindi in a big way, a Kavi Sammelan was organized in which famous Hindi Poets Shri Hari Om Pawar, Dr. Sunil Jogi and Ms. Sita Sagar charmed with their satirical poetry in Hindi and motivated all, to work in Rajbhasha. The Company has been honored with RAJBHASHA SHREE SAMMAN by Bhartiya Rajbhasha Vikas Sansthan, Dehradun during the financial year 2013-14.

During the financial year 2013-14, the Parliament Committee on Offcial Language inspected 5 Zonal/ Project offices of the Company at Shimla, Guwahati, Panchkula, Bhubaneswar and Mumbai to review the progress of Hindi made by these offices. The progress of Offcial Language IMPLEMENTATION was reviewed from time to time by internal Committee headed by CMD and measures undertaken to overcome the diffculties in order to achieve the targets. Ministry of POWER''s officers have reviewed progress of Hindi work at Corporate office as well as inspected 3 Project offices during the year.

Website of the Company is maintained both in Hindi and English and is regularly being updated from time to time. Bilingual working facility has been made available on all computers. All publications, reports, memorandums, press releases, MoUs, tenders, annual report etc. were issued bilingually. To give impetus to the correspondence in Hindi, standard formats have also been made available on Intranet.

22. PARTICulARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXChANGE EARNINGS & OuTGO.

22.1 Conservation of Energy

There are no significant particulars, relating to conservation of energy, TECHNOLOGY absorption under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 as your Company does not own any manufacturing facility. However, the Company has made intensive use of TECHNOLOGY in its operations during the year under review.

All civil, electrical installation & maintenance of "SCOPE Complex", where the Registered office is located is carried out by Standing Committee of Public Enterprises (SCOPE), an autonomous body. During the financial year 2013-14, SCOPE has saved about Rs. 90 Lakh (approx.) on Energy Conservation due to various actions taken by them, to reduce the consumption of Electrical Energy, Diesel and Gas /PNG etc. with replacement of Elevators, putting of energy efficient light fixtures, LEDs, Exhaust Blowers, water based heating of complex through Hot water Boilers operated through PNG etc. The details of achievement on account of above steps are as under:- 1. Less consumption of about 7,89,000 electrical units costing Rs. 77 lakh (approx.), during the financial year 2013-14 as compared to the previous year; and

2. Less consumption of about 3,900 Litre of Diesel and 20,886 SCM Piped Natural Gas costing Rs. 21.5 lakh (approx.) and Rs. 10.5 lakh (approx.) respectively, during the financial year 2013-14 as compared to the previous year.

22.2 Foreign Exchange Earnings & Outgo

No foreign exchange was earned during the financial year 2013-14. However, the foreign exchange expenditure aggregating Rs. 437.81 crore was made during the financial year on account of Interest, Finance Charges and OTHER expenses.

23. SuBSIDIARY COMPANIES

Your Company has following Wholly Owned Subsidiaries, to focus on additional BUSINESS of consultancy in the areas of DISTRIBUTION, transmission etc.:

(i) REC POWER DISTRIBUTION Company Limited; and

(ii) REC Transmission Projects Company Limited

Further, Ministry of POWER (MoP), Government of India, has also designated REC Transmission Projects Company Limited (RECTPCL) (a Wholly Owned Subsidiary of REC) as "Bid Process Coordinator" (BPC) for selection of Transmission Service Provider (TSP) for independent transmission projects allocated by MoP from time to time, through Tariff Based Competitive Bidding Process notifed for Inter State transmission projects.

Accordingly, in order to initiate DEVELOPMENT of each allocated transmission project, RECTPCL has incorporated a Project Specific Special Purpose Vehicle (SPV) as Wholly Owned Subsidiary Company and after the selection of successful bidder, the respective Project Specific SPV along with its all assets and liabilities is to be transferred to the successful bidder. As on date, the following project Specific Special Purpose Vehicles (SPVs) existed as Subsidiary Companies of RECTPCL:

(i) Nellore Transmission Limited (NTL)

(ii) Baira Siul Sarna Transmission Limited (BSSTL)

(iii) NRSS XXIX Transmission Limited*

(iv) NRSS XXXI (A) Transmission Limited*

(v) NRSS XXXI (B) Transmission Limited*

(vi) Gadarwara (A) Transco Limited #

(vii) Gadarwara (B) Transmission Limited #

* Transferred to selected bidder after March 31, 2014.

# Incorporated after March 31, 2014.

23.1 REC POWER DISTRIBUTION Company limited

During the FINANCIAL Year 2013-14, REC POWER DISTRIBUTION Company Limited (RECPDCL) has not only carried out Third Party Inspection (TPI) but also been involved in preparation of Detailed Project Reports through GPS based feld survey. The new Initiatives undertaken by RECPDCL, during the year includes:

a) Preparation of Detailed Project Report (DPR):

i. under RGGVY XII five year plan;

ii. under National Electricity Fund (NEF) Scheme of Chhattisgarh State POWER DISTRIBUTION Company Limited (CSPDCL);

iii. for revamping the RURAL ELECTRIFICATION under electric supply area (Jamshedpur, Dumla, Dhanbad); and

iv. for Installation of Solar POWER Plants in schools.

b) Project Management Consultancy (PMC) work under RGGVY XII five year plan for PuVVNL in 14 districts and for CSPDCL under National Electricity Fund (NEF) Scheme;

c) Consultancy works for laying of DISTRIBUTION network in the areas of Mumbai for Tata POWER Company Limited;

d) REC QUALITY monitors in 196 Projects & 72 Projects for RE works through open tender; and

e) Third Party Inspection for:

i. village ELECTRIFICATION work under BRGF Fund Scheme of West Bengal State Electricity DISTRIBUTION Company Limited (WBSEDCL);

ii. erection work and material of RE work of 1,291 villages under departmental scheme in Jharkhand state; and

iii. works and workmanship of R-APDRP Part B works for 17 zones of Maharashtra State Electricity DISTRIBUTION Company Limited (MSEDCL).

During the year, RECPDCL has prepared 98 Detailed Project Reports (DPRs) under RGGVY XII five year plan and 33 DPRs under RE works for Rajasthan DISCOMs and carried out Third Party Inspection (TPI) of more than 11,000 Villages as REC QUALITY Monitors.

The performance of RECPDCL has improved and the financial performance of the company is on the fast trajectory growth path. The company''s gross income during the financial year 2013-14 has increased by 145.5% to Rs. 75.16 crore compared to the previous year income of Rs. 30.61 crore. The profit Before Tax (PBT) during the financial year 2013-14 has increased by 214% to Rs. 50.18 crore as compared to Rs. 15.98 crore in the previous year. The profit After Tax (PAT) during the financial year 2013-14 has also increased by 205.36% to Rs. 33 crore from Rs. 10.81 crore during the previous year. The Net-worth of RECPDCL is now Rs. 60.22 crore (previous year Rs. 27.52 crore) in its 7th year of operation as against initial capital of Rs. 0.05 crore injected by REC. The Board of Directors of the company has recommended a dividend for the financial year 2013-14 @ 500% (Rs. 50/- on per equity share of Rs. 10/- each) on paid up share capital of the company, subject to approval of shareholders of the company in the Annual General Meeting.

23.2 REC Transmission Projects Company limited

During the financial year 2013-14, REC Transmission Projects Company Limited (RECTPCL) has concluded the two stage bidding process featuring separate Request for Qualifcation (RfQ) and Request for Proposal (RfP), for selection of TSP for three projects out of five transmission projects allocated in the year 2012-13, in accordance with Tariff Based Competitive Bidding Guidelines notifed by Ministry of POWER, Government of India and OTHER two projects were de-notifed/put on hold, as details mentioned below:

i. System Strengthening in Southern Region for import of POWER from Eastern Region;

ii. Transmission System required for evacuation of POWER from Kudgi TPS (3 x 800 MW in Phase-I) of NTPC Limited;

iii. ATS of Unchahar TPS;

iv. Transmission System for Connectivity for NCC POWER Projects Limited (1320 MW); and

v. Baira Siul HEP – Sarna 220 kV D/c line.

In respect of project at Sl. No. (i) & (iii) above, M/s POWER Grid Corporation of India Limited emerged as the lowest Bidder, and acquired 100% shares of respective project Specific SPVs i.e. Vizag Transmission Limited and Unchahar Transmission Limited (UTL), on payment of acquisition price on August 30, 2013 & March 24, 2014 respectively.

In respect of project at Sl. No. (ii), M/s L&T Infrastructure DEVELOPMENT Projects Limited has emerged as the lowest bidder and has acquired 100% shares of Kudgi Transmission Limited on August 30, 2013 after payment of acquisition price.

Further, MoP vide Gazette notifcation dated January 2, 2014 had de-notifed the transmission project mentioned at Sl. No. (iv) namely, Transmission System for Connectivity for NCC POWER Projects Limited (1320 MW) due to discovery of higher tariff as compared to CERC norms. In respect of transmission project mentioned at Sl. No. (v) i.e. Baira Siul HEP-Sarna 220 kV D/c line, CENTRAL Electricity Authority has advised to put the bidding process for the project under hold.

In addition to above, during the financial year 2013-14, MoP vide Gazette Notifcation dated May 20, 2013 nominated RECTPCL to act as Bid Process Coordinator for selection of developer for three inter-state transmission systems with aggregate estimated cost of Rs. 32,160 million. These transmission systems are essentially for augmentation/ strengthening of inter-state transmission network. The transmission projects allocated to RECTPCL are as follows:

i. Northern Region System Strengthening Scheme, NRSS – XXIX;

ii. Northern Region System Strengthening Scheme, NRSS – XXXI (Part-A); and

iii. Northern Region System Strengthening Scheme, NRSS – XXXI (Part-B).

After the selection of successful bidder through Tariff Based Competitive Bidding Process, the project Specific SPVs i.e. NRSS XXXI (A) Transmission Limited and NRSS XXXI (B) Transmission Limited have been transferred to M/s POWER Grid Corporation of India Limited & M/s Essel Infraprojects Limited, respectively, on May 12, 2014. Further, after the selection of successful bidder, for Northern Region System Strengthening Scheme, NRSS-XXIX, through Tariff Based Competitive Bidding Process, the project Specific SPV i.e. NRSS XXIX Transmission Limited has also been transferred to M/s Sterlite Display Technologies Private Limited (investing affliate of Sterlite Grid Limited) on August 4, 2014.

In addition to the above, during the current financial year i.e. 2014-15, the Ministry of POWER has also allocated the following five transmission projects to RECTPCL to act as Bid Process Coordinator (BPC) for selection of developer:

i. Transmission system associated with Gadarwara STPS (2x800 MW) of NTPC (Part-A);

ii. Transmission system associated with Gadarwara STPS (2x800 MW) of NTPC (Part-B);

iii. Connectivity lines for Maheshwaram (Hyderabad) 765/400kV Pooling S/s;

iv. Transmission System for LTA of 400 MW for 2x500 MW Neyveli Lignite Corporation Ltd. TS-I (Replacement) (NNTPS) in Neyveli; and

v. Transmission System Strengthening associated with Vindhyachal-V.

In order to initiate DEVELOPMENT of each of the above listed transmission systems, RECTPCL has incorporated two Wholly Owned Subsidiary (WOS) Companies namely "Gadarwara (A) Transco Limited" and "Gadarwara (B) Transmission Limited" on August 5, 2014 and July 30, 2014, respectively, relating to transmission projects detailed at Sl. No. (i) and (ii) above and the incorporation of OTHER three subsidiary companies is under process.

During the financial year ended March 31, 2014, REC Transmission Projects Company Limited has been able to generate an income of Rs. 35.18 crore. The profit before tax and profit after tax for the year is Rs. 34.30 crore and Rs. 23.86 crore respectively. The Net-worth of RECTPCL is now Rs. 68.92 crore as against initial capital of Rs. 0.05 crore injected by REC, in year 2007. For the year, the Board of Directors has recommended a dividend @ 200% (Rs. 20/- on per equity share of Rs. 10/- each) on the paid up value of shares, subject to approval of shareholders of the company in the Annual General Meeting.

24. FINANCIAL STATEMENTS/DOCuMENTS uNDER SECTION 212 OF ThE COMPANIES ACT, 1956.

The Ministry of Corporate Affairs, Government of India, vide its Circular dated February 8, 2011 has granted general exemption to all companies from attaching the financial statements of its subsidiary companies, pursuant to Section 212(8) of the Companies Act, 1956, subject to compliance of certain conditions by the companies as prescribed in this circular. Accordingly, copies of the balance sheet, statement of profit and loss and reports of the Board of Directors and Auditors of the subsidiaries for the financial year 2013-14 have not been attached with the balance sheet of the Company.

The Audited FINANCIAL Statements and related information of subsidiaries of the Company are available on the website of the Company www.recindia.gov.in under the head ''Subsidiary Companies''. However, these documents will be made available upon request by any member of the Company interested in obtaining the same. As directed by the CENTRAL Government, a statement containing the financial data of the subsidiaries has been furnished along with the consolidated financial statements, which forms part of this Annual Report. The annual accounts of the Company including that of subsidiaries will be kept for inspection by any member at the Registered office of the Company. Further, pursuant to Accounting Standard-21 (AS-21) prescribed under the Companies (Accounting Standard) Rules, 2006, Consolidated FINANCIAL Statements presented by the Company include financial information about its subsidiary companies. However, those subsidiary companies which are incorporated by the Company for the purpose of subsequent disposal have not been consolidated in the accounts of the Company.

25. Mou RATING AND AwARDS

The performance of your Company in terms of MoU signed with the Government of India in the Ministry of POWER for the financial year 2012-13 has been rated as "Excellent". This is the 20th year in succession that REC has received "Excellent" rating since the year 1993-94 when the first MoU was signed with the Government. For the financial year 2013-14 also, the performance of the Company is poised to receive "Excellent" rating. During the year, your Company received Award in the category of ''Energy & POWER Sector'' from India Pride Awards, Dainik Bhaskar & DNA, DSIJ PSU Award 2013 for ''Best Value creating Navratna with a Balance Sheet of more than Rs. 1 Lakh crore'' and also rated among the Best Employers in India by Aeon Hewitt.

Your Company was honoured with the Helpage India ''Gold Plate Award'' on the occasion of INTERNATIONAL Day for Older Persons in recognition of the project ''Multi Facility Health Package for Old Age Homes'' funded under its CSR initiatives. Your Company has also been honored with RAJBHASHA SHREE SAMMAN by Bhartiya Rajbhasha Vikas Sansthan, Dehradun during the financial year 2013-14.

Further, in recognition of good Corporate Governance practices followed by the Company, the INSTITUTE of Company Secretaries of India (ICSI), a statutory body constituted under the Company Secretaries Act, 1980 has adjudged your Company as one of the ''Best Governed Company'' and conferred 13th ICSI National Award for Excellence in Corporate Governance for the year 2013.

26. PARTICulARS OF EMPlOYEES uNDER SECTION 217(2A) OF ThE COMPANIES ACT, 1956.

During the financial year 2013-14, no employee of the Company was drawing remuneration either on monthly or annual basis exceeding the limit as prescribed under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particular of Employees) Rules, 1975.

27. BOARD OF DIRECTORS

During the financial year 2013-14, there was no change in the composition of the Board of the Company. However, the tenure of three years of Dr. Devi Singh (DIN 00015681) and Shri Venkataraman Subramanian (DIN 00357727), Part Time Non Offcial Independent Directors has been completed on June 9, 2014 and both of them ceased to be directors from that date.

As per the provisions of the Companies Act, 2013 and in terms of provisions of Article 82 (4) of Articles of Association of the Company, Shri Ajeet Kumar Agarwal, shall retire by rotation at the 45th Annual General Meeting and being eligible, offers himself for re-appointment. The Board of Directors recommends his reappointment. His brief resume is furnished in the Notice for the Annual General Meeting.

28. DIRECTORS'' RESPONSIBILITY STATEMENT

With reference to Section 217 (2AA) of the Companies Act, 1956, your Directors confirm that:–

(i) in the preparation of the annual accounts for the year ended March 31, 2014, the applicable Accounting Standards have been followed and no material departures have been made from the same;

(ii) such accounting policies have been selected and applied consistently (except for changes in Accounting Policies as disclosed in the Notes to Accounts to the FINANCIAL Statements) and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) proper and suffcient care is taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and OTHER irregularities;

(iv) the annual accounts have been prepared on a going concern basis.

29. GREEN INITIATIVE IN CORPORATE GOVERNANCE

The Companies Act, 2013 permits companies to send documents like Notice of Annual General Meeting, Annual Report and OTHER documents through electronic means to its members at their registered email addresses, besides sending the same in physical form.

As a responsible Corporate Citizen, your Company has actively supported the IMPLEMENTATION of ''Green Initiative'' of Ministry of Corporate Affairs (MCA) and effected electronic delivery of Notice of Annual General Meeting (AGM) and

Annual Report for the last three year(s) i.e. 2010-11 to 2012-13 and Postal Ballot Notice alongwith annexures to those shareholders whose email ids were already registered with the respective Depository Participants (DPs) and downloaded from the depositories viz. NSDL/CDSL and who have not opted for receiving Annual Report in physical form. The intimation of Final/Interim Dividend paid after the issue of above circulars were also sent electronically to those shareholders whose email ids were registered.

Members, who have not registered their e-mail addresses so far, are requested to register their e-mail address with the Registrar and Share Transfer Agent (R&TA) of the Company / Depository Participant (DP) of respective Member and take part in the Green Initiative of the Company, for receiving electronic communications and support the "THINK GREEN, GO GREEN" initiative.

It is reiterated that upon receipt of requisition from the member including the members who have exercised the option of electronic delivery of these documents, every member of the Company is entitled to receive free of cost, a copy of the Balance Sheet of the Company and all OTHER documents required by law to be attached thereto, including the Statement of profit and Loss and Auditors'' Report etc.

The Company is providing e-voting facility to all members to enable them to cast their votes electronically on all resolutions set forth in the Notice of AGM. This is pursuant to Section 108 of the Companies Act, 2013 and Rule 20 of the Companies (Management and Administration) Rules, 2014. The instructions for e-voting are provided in the Notice of AGM.

30. RIGhT TO INFORMATION ACT, 2005

The Company has taken necessary steps for the IMPLEMENTATION of "Right to Information Act, 2005 (RTI)" in REC and independent RTI Cell has been set up for coordinating the work relating to receipt of applications and furnishing information thereto. RTI Handbook, both in English and Hindi, has been placed on REC website which is updated periodically.

The status of RTI applications during the financial year 2013-14 is as follows:

Sl. Particulars Nos. No.

1. Applications received (upto March 31, 2014) 248

2. Applications disposed off (upto March 31, 2014) 236

3. Applications disposed off subsequently 12

4. Appeals received by First Appellate Authority, REC 21

5. Appeals disposed off by First Appellate Authority, REC 21

6. Appeals received from CENTRAL Information Commission (CIC) 5

7. Appeals disposed off by CENTRAL Information Commission (CIC) 5

31. STATuTORY AuDITORS

M/s Raj Har Gopal & Co., Chartered Accountants, New Delhi and M/s P.K. Chopra & Co., Chartered Accountants, New Delhi, were appointed as Joint Statutory Auditors of your Company for the financial year 2013-14 by the Comptroller and Auditor General (C&AG) of India. The Joint Statutory Auditors have audited the FINANCIAL Statements of the Company for the financial year ended March 31, 2014.

31.1 Management''s Comments on the Joint Statutory Auditors'' Report

The Joint Statutory Auditors of the Company have given an unqualified report on the financial statements of the Company for the financial year 2013-14. However, they have suggested that internal CONTROL System needs to be further strengthened. The Management''s Reply to the observations / advice in respect of further strengthening the internal CONTROL system in certain areas, as mentioned in para (iv) of Annexure to the Independent Auditors'' Report referred in Point No. 5 (i) of the Report are submitted as under:

Observation of Joint Statutory Auditors Management''s Reply

"In our opinion and according to information & explanations given to us, internal CONTROLs "Continuous efforts are being for purchase of fixed assets and for the financial services are generally commensurate made to further strengthen with the size of the Company and the nature of its BUSINESS. However in certain areas the internal CONTROL in the said internal CONTROL needs further strengthening like monitoring and supervision of LOANS areas." given to various SEBs / DISCOMs / TRANSCOs / GENCOs including obtaining search reports for charges created against the LOANS given and physical verifcation of assets charged to REC as security after Commercial Operations Date."

32. COMMENTS OF C&AG OF INDIA

The Comptroller and Auditor General (C&AG) of India, through letter dated July 5, 2014 has given ''NIL'' Comments on the Audited FINANCIAL Statements of your Company for the year ended March 31, 2014 under Section 619 (4) of the Companies Act, 1956. The Comments of C&AG for the financial year 2013-14 have been placed along with the report of Statutory Auditors of your Company elsewhere in this Annual Report.

33. SECRETARIAl AuDITORS

M/s Chandrasekaran Associates, Practicing Company Secretaries, New Delhi, appointed as Secretarial Auditors of your Company for carrying out Secretarial Audit for the financial year 2013-14, have given an unqualified Secretarial Audit Report. A copy of the Secretarial Audit Report is annexed to this Report.

34. DEBENTuRE TRuSTEES

In compliance to the requirements of Debt Listing Agreement, the details of Debenture Trustees appointed by the Company, for different series of Bonds issued by the Company, from time to time, is annexed to this report.

35. STATuTORY AND OTHER INFORMATION REQuIREMENTS

Information required to be furnished as per the Companies Act, 1956, Listing Agreement executed with Stock Exchanges, Government Guidelines etc. is annexed to this report as under:

Particulars Annexure

Management Discussion & Analysis Report I

Report on Corporate Governance II

Certifcate from Joint Statutory Auditors of the Company regarding compliance of conditions of III Corporate Governance

BUSINESS RESPONSIBILITY Report IV Secretarial Audit Report issued by the Secretarial Auditors of the Company V

Statement pursuant to Section 212 (1) (e) of the Companies Act, 1956 relating to subsidiary companies VI

Detailed Report on Corporate SOCIAL RESPONSIBILITY and Sustainability Activities VII

Details of Debenture Trustees appointed by the Company for different series of Bonds VIII

36. ACKNOWLEDGEMENTS

The Directors are grateful to the Government of India particularly the Ministry of POWER and Ministry of Finance, the Planning Commission and the Reserve Bank of India for their continued co-operation, support and guidance in effective management of the Company''s affairs and RESOURCEs.

The Directors thank the State Governments, State Electricity Boards, State POWER Utilities and OTHER Borrowers for their continued support and trust in the Company.

The Directors also place on record their sincere appreciation for the continued support and goodwill of the esteemed Shareholders, Investors in REC Bonds, domestic and overseas Banks, Life Insurance Corporation of India, KfW of Germany and JICA of Japan in the fund raising programmes of the Company.

The Directors also thank Joint Statutory Auditors M/s Raj Har Gopal & Co. and M/s P.K. Chopra & Co., the Secretarial Auditors M/s Chandrasekaran Associates and the Comptroller & Auditor General of India for their valued cooperation.

The Directors also sincerely appreciate and thank all the employees of the Company for their valuable contribution and dedicated efforts in steering the Company to excellent performance for yet anOTHER year in succession.

For and on behalf of the Board of Directors

(Rajeev Sharma)

Chairman & Managing Director (DIN 00973413) New Delhi

August 12, 2014


Mar 31, 2013

To The Shareholders,

The Directors have pleasure in presenting the Forty Fourth Annual Report together with the Audited Financial Statements of your Company for the financial year ended 31st March, 2013.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the financial year 2012-13 were as under with comparative position of previous year''s performance:-

(Rs. in crore)

Parameter 2012-13 2011-12

Loans sanctioned (excluding 79470.49 51296.77 sanctions under RGGVY)

Disbursements (including 40183.06 30593.30 subsidy under RGGVY & DDG)

Recoveries (including interest) 26728.86 18440.09

Total Operating Income 13518.86 10423.75

Profit before tax 5163.95 3792.86

Profit after tax 3817.62 2817.03

1.2 Financial Performance

The total operating income of your Company for the financial year 2012-13 increased by 30% to Rs. 13518.86 crore from Rs. 10423.75 crore during the previous year. The profit after tax increased by 36% to Rs. 3817.62 crore from Rs. 2817.03 crore for the previous year.

Loan asset book of your Company as on 31st March, 2013 has increased by a healthy 26% to reach a historic high of Rs. 127356 crore from Rs. 101426 crore in the previous year. The outstanding borrowings as on 31st March, 2013 were Rs. 107791 crore.

Earnings Per Share (EPS) for the financial year ended 31st March, 2013 was Rs. 38.66 per share of Rs. 10/- each as compared to Rs. 28.53 per share in the previous year. Net worth of the Company as on 31st March 2013 has increased by 20% to Rs. 17454 crore from Rs. 14563 crore in the previous year.

1.3 Dividend

In addition to interim dividend of Rs. 6.75 per share paid in February, 2013, Directors of your Company have recommended a final dividend of Rs. 1.50 per share for the financial year 2012-13, which is subject to approval of the Shareholders in the ensuing Annual General Meeting. The total dividend for the financial year 2012-13 will work out to Rs. 8.25 per share of Rs. 10/- representing 82.50% of the paid up capital of the Company and 21.34% of Profit After Tax, against 75% of the paid up capital of the Company and 26.29% of Profit After Tax paid in the previous year. The total dividend pay-out for the financial year will amount to Rs. 814.65 crore (excluding dividend tax).

1.4 Share Capital

The Issued and Paid up Share Capital as on 31st March, 2013 was Rs. 987.46 crore divided into 98,74,59,000 equity shares of Rs. 10/- each against the Authorized Share Capital of Rs. 1200 crore. The Government of India holds 66.80% of the paid up equity share capital.

2. LOANS SANCTIONED

Your Company sanctioned loans worth Rs. 79470.49 crore during the financial year 2012-13, as against Rs. 51296.77 crore in the previous year, excluding sanctions under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). The state and category-wise break- up of loans sanctioned during the financial year are given in Table-1 and 2 respectively. The cumulative amount of sanctions made since inception up to 31.03.2013 was Rs. 483847.28 crore, as details given in Table-3.

3. DISBURSEMENTS

A total sum of Rs. 40183.06 crore was disbursed during the financial year 2012-13 as against Rs. 30593.30 crore in the previous year including subsidy under RGGVY & DDG. The cumulative amount disbursed since inception up to 31.03.2013 was Rs. 205148.08 crore excluding subsidy under RGGVY & DDG. The state-wise disbursements and repayment of loan by borrowers during the year together with cumulative figures and outstandings as on 31.03.2013 are given in Table-4.

4. RECOVERIES

4.1 The amount due for recovery including interest during the financial year 2012-13 was Rs. 26881.04 crore as compared to Rs. 18528.61 crore in the previous year. The Company recovered a total sum of Rs. 26728.86 crore during the year 2012-13 against Rs. 18440.09 crore in the previous year. The overdues from defaulting borrowers as on 31.03.2013 were Rs. 435.82 crore. The Recovery Rate for the Financial Year 2012- 13 was 99.04% as against MoU target of 98.50% for same:

4.2 Your Company''s Non-Performing Assets (NPAs) continue to be at the low levels. As on 31.03.2013, the Gross NPAs of the Company remained unchanged at Rs. 490.40 crore due to which the percentage of NPA declined / decreased to 0.39% as on 31.03.2013 as compared to 0.48% of Gross Loan Assets as on 31.03.2012.

5. FINANCIAL REVIEW

5.1 A Summary Of Financial Results

The summary of audited financial results of the Company for the financial year ended 31st March, 2013 is given as under: (Rs. in crore)

Particulars Standalone Consolidated

2012-13 2011-12 2012-13 2011-12

Revenue from 13518.86 10423.75 13525.70 10429.39 operations

Other Income 79.81 85.32 110.88 124.23

Total Income 13598.67 10509.07 13636.58 10553.62

Finance Costs 8006.25 6378.80 8005.86 6378.84

Other Operating 220.28 232.59 235.76 244.16 Expenses

Allowance against 130.68 52.27 131.24 52.27 Loan Assets

Foreign Currency 77.51 52.55 77.51 52.55 Exchange Fluctuation Loss

Total Expenses 8434.72 6716.21 8450.37 6727.82

Profit Before Tax 5163.95 3792.86 5186.21 3825.80

Provision for Taxation 1346.33 975.83 1353.43 987.14

Profit After Tax 3817.62 2817.03 3832.78 2838.66

5.1.2 Contribution to National Exchequer

During the financial year 2012-13, the Company contributed an amount of Rs. 2164.25 crore as compared to Rs. 1729.69 crore in the previous year to National Exchequer in the form of payment of Dividend paid to the Government of India against its holding in the company, Direct Taxes, Dividend Tax and Service Tax, as detailed below:

(Rs. in crore)

Particulars 2012-13 2011-12

Dividend paid to the GoI 610.14 593.65

Direct Taxes 1376.21 981.58

Dividend Tax* 148.16 144.17

Service Tax collected and paid 29.74 10.29 during the year including the CENVAT credit availed.

Total 2164.25 1729.69

*Includes final dividend tax for the previous year paid during the current year and for interim dividend for the current year.

5.1.3 Ratio analysis

A comparative statement of important ratios of the Company for the financial year 2012-13 vis-a-vis 2011-12, are mentioned below:

Particulars 2012-13 2011-12

Earnings per Share (Rs.) 38.66 28.53

Return on Average Net Worth (%) 23.85 20.60

Book Value per Share (Rs.) 176.76 147.48

Debt to Equity Ratio (times) 6.18 6.18

Price Earnings Ratio (times) 5.39 7.20

Interest Coverage Ratio (times) 1.59 1.64

5.2 Resource Mobilization

Your Company mobilized Rs. 30759.16 crore from the market during the financial year 2012-13 for its operational requirements. This includes Rs. 4903.25 crore raised by way of Capital Gains Tax Exemption Secured Redeemable Non-convertible Taxable Bonds, under Section 54EC of the Income Tax Act, 1961, Rs. 2648.41 crore raised by way of Tax Free Secured Redeemable Non-convertible Bond u/s 10(15)(iv) (h) of the Income Tax Act, 1961, out of which Rs. 500 crore raised through private placement and remaining raised through public issue in two tranches in line with terms of notification, Rs. 2117.18 crore through Commercial Paper (CP), Rs. 16378.90 crore through issue of Institutional Bonds, and Rs. 4464.40 crore by way of External Commercial Borrowings and Rs. 247.02 crore by way of Official Development Assistance (ODA) loan from Kreditanstaltfur Wiederaufbau (KfW), Germany, & Japan International Cooperation Agency (JICA), Japan.

Utilization of proceeds of tax Free Bonds

Your Company mobilised Rs. 2648.41 crore from the market during financial year 2012-13 by way of Tax Free Secured Redeemable Non-convertible Bond u/s 10(15)(iv)(h) of the Income Tax Act, 1961, (Rs. 500 crore through private placement and Rs. 2148.41 crore through public issues). As on date, the entire proceeds of the fund mobilised through these bonds was utilised for lending and other operational business of the company.

External Commercial Borrowings

Your Company mobilized USD 830 million (Rs. 4464.40 crore) as Term Loans from international markets during the financial year 2012-13.

Cash Credit Facilities

Your Company has an approved cash credit /WCDL limit of Rs. 2500 crore for availment from various banks for its day to day operations.

5.3 Domestic and International Credit Rating Domestic

During the financial year 2012-13, the domestic debt instruments of REC continued to enjoy "AAA" or equivalent rating-the highest ratings assigned by CRISIL, CARE, India Ratings & Research and ICRA Credit Rating Agencies.

International

Your Company enjoys international credit rating from International Credit Rating Agencies Moody''s and Fitch which are "Baa3" and "BBB-" respectively equivalent to sovereign rating of India. "Baa3" rated obligations denote moderate credit risk and "BBB-" rated obligations denote that expectations of default risk are currently low.

5.4 Cost of borrowing

The overall weighted average annualized cost of funds raised during the financial year 2012-13 was 7.52% p.a. and Interest Coverage Ratio was 1.64. As a result your Company was able to deliver debt financing at competitive rates.

5.5 Redemption and Pre-Payment

During the financial year 2012-13, the Company repaid a total sum of Rs. 10775.84 crore which includes Rs. 7055.82 crore to Institutional Bond Holders, Term Loans of Rs. 652.74 crore to Banks / FIs, Rs. 9.50 crore of loan from Government of India, Rs. 3057.78 crore to bond holders of Capital Gains Tax Exemption Secured Redeemable Non-convertible Taxable Bonds u/s 54 EC of Income Tax Act, 1961 and Rs. 228.29 crore of Official Development Assistance (ODA) loan have also been redeemed during the financial year 2012-13.

5.6 Deployment of Resources at the close of the year

At the close of the financial year 2012-13, the total resources of your Company stood at Rs. 130507.29 crore. Out of this, Equity Share Capital contributed Rs. 987.46 crore, Reserve and Surplus stood at Rs. 16466.92 crore, Loans from Financial Institutions, Commercial Banks and market borrowings through Bonds and Commercial Papers accounted for Rs. 107791.17 crore and other liabilities & provisions stood at Rs. 5261.74 crore. These funds were deployed as Long / Short Term Loans of Rs. 127266 crore (net of allowances Rs. 89.54 crore), Fixed Assets (net of depreciation) of Rs. 80.05 crore (including Capital Work in progress & Intangible Assets under development), Investments of Rs. 660.61 crore, Deferred Tax Assets of Rs. 9.51 crore, Cash & Bank Balance of Rs. 1484.26 crore and other assets of Rs. 1006.86 crore.

5.7 Policy Initiative

Your Company constantly reviews and revises its lending and operational policies/ procedures to suitably align with market requirements as also with its corporate objectives.

In spite of growing competition in the market as well as concerns on account of factors like high government borrowings etc., your Company has been able to maintain healthy spreads, balancing its objectives of business growth and profitability during the year.

Further, your company has formed a "Strategic Business Group" comprising of senior officers to explore new business opportunities and look for the new products with regard to the business development of the company.

6. PRESENT DISTRIBUTION SCENARIO AND MAJOR CHALLENGES

The present scenario of Transmission and Distribution (T&D) industry is much more challenging in comparison to the past since we had achieved highest ever Generation Capacity addition during XI plan and further set a target for addition of another 88425 MW during XII plan. For transmission and distribution of such huge magnitude of power, a reliable & efficient system is required for transfer of power from generation facilities to sub-stations or between sub- stations and up to the consumer end.

The T&D system basically comprises of transmission lines (inter-state and intra-state), Sub- stations, switching stations, transformers and distribution lines etc. of various voltage levels. Distribution has been identified as the weakest link in the power value chain and most difficult to deal with due to various reasons. The ever increasing demand of affordable, reliable and quality power by various class of consumers makes distribution all the more challenging task. Your Company has always strived to play an active role in creation of new infrastructure and augmentation/ strengthening of the existing ones. Your company encourages the DISCOMs to expedite various reform measures and to adopt best practices including modernization and automation of systems/smart grid, IT-enabled systems for metering and consumer services, other technology interventions in the distribution sector & helps them in improving their operational and financial performance. Distribution is gateway for all the revenue coming into the power sector and hence plays a pivotal role in development and sustainability of the Power sector.

Major challenges presently being faced by distribution sector includes accumulated losses of most of DISCOMs & their poor net worth, long exposed LT lines resulting in pilferage & theft causing dent on their cash flow, high AT&C losses, limited capability to implement capital expenditure plans, delay in tariff order which results in creation of regulatory assets, carrying cost of these regulatory assets, lack of tariff rationalisation leading to cross subsidy, open access issues, timely release of subsidy by State Government, delayed revenue collection cycle etc. The overall performance of the state distribution utilities has been an issue of concern due to the above factors. Keeping in tune with the times and dynamic environment wherein utilities are struggling and striving hard to meet the consumer expectation, your company today finances entire gamut of distribution projects broadly with the objectives of system improvement & augmentation, Loss reduction measures, IT-enabling, consumer satisfaction etc. Your company is always ready to meet and consider special dispensation/ requirements of DISCOMs based on the prudence/ merit and sound appraisal mechanism. A dedicated strategic management group has been set up in company for this purpose.

Further, your company is playing a pivotal role in partnering with MoP, GoI in all major initiative and its commitment to improve and turn around the power distribution sector in the country, by its deep involvement in programme like RGGVY (Nodal Agency), R-APDRP, NEF (Nodal Agency), FRP (Financial Restructuring Plan), Feeder Separation Programme, Smart Grid task force etc. With all these major interventions your company is optimistic that distribution scenario would be much better in not too distant future when the results and effect of above massive programmes in conjunction with the reforms measure by the respective states starts trickling in and transform the entire landscape of distribution.

6.1 Major reforms in Distribution sector

Government of India has made all effort to intervene in the sector for ensuring overall development by way of Electricity Act 2003 and various other policy measures such as National Tariff Policy, National Electricity Policy, Rural Electrification Policy etc., to provide a comprehensive framework and also the blueprint for power sector reforms. The sector has shown sign of improvement in operational and financial performance during last few years which have still to go a long way. The process of un- bundling, corporatisation, instituting regulatory commission etc, has already been completed in most of the states giving accountability and more autonomy to the DISCOMs. Further some of the DISCOMs have gone ahead for appointing franchisees on case to case basis in order to improve operational efficiency in a particular area.

In the past decade, Government of India (GoI) through Ministry of Power has launched several programmes to extend the benefits to these ailing DISCOMs such as APDRP with an objective to strengthen the infrastructure and to reduce the losses, RGGVY to ensure last mile connectivity and to release service connections to BPL, R-APDRP for undertaking improvements in urban pockets and to introduce IT enabling of distribution systems, NEF- Interest Subsidy Scheme to promote capital investment & expedite the reform process in distribution sector, FRP to restructure of loans to provide liquidity to the DISCOMs with joint participation of Central & State Government.

In a major initiative Ministry of Power (MoP) has come up with Integrated Rating System for all the state DISCOMs in the country which would facilitate realistic assessment of performance. The system would enable these DISCOMs to weigh their strength & weakness and facilitate a focused approach for achieving further improvements in their operational and financial performance. It will also aid in adoption of consistent approach by Banks/FIs while considering funding proposals of distribution companies.

REC has been providing counterpart funding for a large number of R-APDRP projects which aim to reduce the Aggregate Technical and Commercial (AT&C) losses considerably in urban areas. To further expedite the reform process GoI has recently launched National Electricity Fund (NEF) - Interest Subsidy Scheme which will act as catalyst for incentivising capital investment in power distribution infrastructure. MoP is also working toward ensuring technological intervention through introduction of Smart Grid and has already extended financial assistance to several pilot projects. The information & communication technology in power Distribution Sector shall enable the electric system to become "SMART"- & Near-real- time information allows utilities to manage the entire system as an integrated framework, actively sensing and responding to changes in power demand, supply, costs, quality of power. Similarly, better information enables consumers to manage energy use to meet their needs. A technology enabled electric system will be more efficient, will enable applications that can reduce greenhouse gas emissions, and improve power reliability. Development of intelligent grid at local distribution level shall however be crucial for ensuring efficient & seamless flow of power, up to last mile access by embedding IT/Internet/Communication Technologies in the existing grid for data acquisition on real time and supervisory control throughout the network. This will include integrated communication system, sensing and measurement technology, advance components for control & determining electrical behaviour & online management of the grid upto Distribution Transformer level and eventually up to consumer point. The on-going R-APDRP programme will set a stepping stone equipping the DISCOMs to integrate with further technical advancement and to make the grid smarter.

With all above measures the GoI is basically working on two different fronts one to provide power to all and second to improve operational & financial performance of the utility by extending reform incentives. The results of these measures have already started to show effect in terms of timely notification of tariff by regulator in many states, filing of MYT petitions, claiming of Return of Equity in the ARR, release of revenue subsidy by state government, updation of annual accounts, etc

The operational performance of the utility in terms of availability of systems shall improve by providing, metering upto distribution transformer level for better energy accounting resulting in reduction of commercial losses, segregation of feeders for ensuring reliable power to rural households as well as agriculture in many states, reduction in AT&C losses because of proper energy accounting and capital expenditure towards reduction of technical losses. Further, the utilities are reducing their GAP between Average Cost of Supply and Average Revenue Realised by timely filing of tariff / truing up petition which in turn results in timely notification of tariff.

6.2 National Electricity Fund

Your Company is the Nodal Agency for National Electricity Fund (NEF) - Interest Subsidy Scheme set up by Ministry of Power, Government of India to provide interest subsidy on loans disbursed to the State Power Utilities, Distribution Companies (DISCOMs) - both in public and private sector, to improve the infrastructure in distribution sector. The scheme is aimed to incentivize much needed investment into distribution. The scheme is reform linked and interest subsidy is payable to the DISCOMs on achievement of reforms parameters outlined in NEF guidelines issued by Ministry of Power in July 2012. This interest subsidy (3% to 7%) would be provided on loans taken by private and public power utilities in distribution sector for all Distribution Sector Infrastructure capital works, not covered under on-going Government Programmes like R-APDRP or RGGVY schemes.

NEF provides interest subsidy aggregating Rs. 8466 crore spread over 14 years for loan disbursement amounting to Rs. 25,000 crore for distribution schemes sanctioned during the 2 years viz., 2012-13 and 2013- 14. Your company during financial year 2012-13 has sanctioned NEF proposals amounting to Rs. 10953 crore to 11 DISCOMs of 8 states for taking benefits under NEF and respective state DISCOMs will start taking benefits of (3% to 7%) subsidy on interest rate based on their achievement mainly on two major efficiency benchmark parameters i.e., reduction of AT&C losses & reduction in revenue gap (ARR & ACS).

7. FINANCING ACTIVITIES

Your Company has been providing funding assistance for power generation, transmission & distribution projects besides for electrification of villages. Details of major financing activities during the financial year 2012-13 are as under:

7.1 Generation

During the financial year 2012-13, your Company sanctioned 41 nos. of generation / R&M loans including 13 no. of additional loan assistance with total financial outlay of Rs. 26854.79 crore including consortium financing with other financial institutions and has disbursed Rs. 12496.87 crore against the ongoing generation projects.

The sector wise break up of loans sanctioned including additional loan assistance is as under:

(Rs. in crore)

Particulars No. of Loan Loans Amount

STATE SECTOR

Fresh Loan 19

19228.87

Additional Loan 2

PRIVATE SECTOR

Fresh Loan 9

7625.92

Additional loan 11

Total 41 26854.79

7.2 Renewable Energy

During the financial year 2012-13, REC sanctioned loan assistance of Rs. 580.06 crore to 11 grid-connected Renewable Energy projects with installed generation capacity aggregating 126.60 MW which included 4 Solar photo-voltaic projects of 50 MW, 1 Solar Thermal Project of 25 MW, 1 Biomass project of 10 MW, 1 Wind Project of 6.8 MW and 4 Small Hydro projects of 34.8 MW. Total cost of above projects aggregates to Rs. 1824.75 crore. During the year, total disbursement was Rs. 240.51 crore for renewable energy projects as detailed below:

Assistance to Unit 2012-13 2011-12 Renewable Energy Projects (Grid- Connected)

No. of Projects Nos. 11 8 Sanctioned

Capacity of MW 126.60 70.00 Sanctioned Projects

Cost of Projects Rs. Crore 1824.75 685.47

Loan Sanctioned* Rs. Crore 580.06 342.19

Loan Disbursed* Rs. Crore 240.51 144.54

*Includes one additional loan of Rs. 4.66 crore sanctioned to existing project with additional project cost of Rs. 7.45 crore.

7.3 Transmission & Distribution

Your Company continued to play an active role in creation of new infrastructure and improvement of the existing ones under the transmission and distribution network in the country under its T&D portfolio. In line with the GoI''s objective to provide power for all by creation of infrastructure and also to reduce the AT&C losses, your Company has been financing schemes for expansion and strengthening of the transmission network and more importantly, modernizing the distribution system.

During the financial year 2012-13, your Company sanctioned 955 nos. of Transmission and Distribution schemes involving a total loan assistance of Rs. 31215.63 crore. This includes primary power evacuation schemes associated with generating plants, system improvement schemes including R-APDRP projects, feeder segregation schemes, bulk loan schemes, intensive electrification schemes and pumpset energisation schemes.

The state-wise and category-wise details of the projects sanctioned are as per Table 1 & 2 respectively. The major programmes covered by your company under T&D sanctions in brief are as under:

7.3.1 System Improvement & Bulk Loan

To overcome the system deficiencies and to improve the quality and reliability of power supply, REC finances System Improvement schemes, based on system studies of an electrical distribution network considering present status of system capacities, connected demand, voltage profiles and level of losses, together with scope for future load growths.

The system improvement programme also includes Bulk loan schemes meant for procurement and installation of meters, transformers, capacitors etc, HVDS schemes meant for conversion of LVDS to HVDS so as to improve the HT: LT ratio. System Improvement schemes reduce the AT&C losses to a great extent.

During the financial year 2012-13, a total of 814 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs. 29128 crore. This included: (i) 58 schemes involving a loan assistance of Rs. 2540.27 crore for financing investment in the distribution system by way of installation of essential equipments like transformers, meters, capacitors etc. (ii) 1 scheme involving a loan assistance of Rs. 192.27 crore for conversion of Low Voltage Distribution to High Voltage Distribution System (HVDS), (iii) 316 schemes for Rs. 8809.41 crore for improving the distribution system, (iv) 234 schemes involving loan assistance of Rs. 3758.55 crore towards counterpart funding of part B of R-APDRP projects, and (v) 205 schemes for loan assistance of Rs. 13827.50 crore for improving the transmission network.

7.3.1 Intensive Electrification

Schemes under this activity mainly aim at intensive electrification of already electrified villages. During the financial year 2012-13, a total of 17 intensive electrification schemes were sanctioned involving a loan outlay of Rs. 315.51 crore.

7.3.2 Pumpsets Energisation

REC''s loan portfolio also includes extension of loan assistance for energisation of agricultural pumpsets. During the financial year 2012-13, under REC financed schemes 254993 Nos. electric irrigation pumpsets were reported to be energized. A loan assistance of Rs. 1772.12 crore was sanctioned for 124 new schemes during the year under this category. The state - wise details and cumulative position of pumpset energized up to 31.3.2013 are given in Table-5.

7.4 Financing Activities in North Eastern states

During the financial year 2012-13, a loan assistance of Rs. 1543.45 crore was sanctioned to North Eastern States for Generation schemes which include Rs. 995 crore for Teesta Urja-III project at North Sikkim, Rs. 61.45 crore for Dans Energy project at South Sikkim and Rs. 487 crore to M/s Gati Infrastructure Limited for its 2X55 MW Hydro Power Project at Chuzachen in Sikkim on the tributaries of Teesta Rivers Rangpo & Rangoli in East Sikkim.

Further a loan assistance of Rs. 509.78 crore was disbursed to North Eastern states for Generation projects which include Rs. 431.58 crore to M/s Teesta Urja Private Limited, Rs. 26.70 crore to M/s Lanco Energy Private Limited, Rs. 51.50 to M/s Dans Energy Private Limited. A loan assistance of Rs. 9.97 crore was also disbursed to North Eastern states under T&D schemes, during the financial year 2012-13.

8. INTERNATIONAL COOPERATION & DEVELOPMENT

REC has signed its third loan agreement with KfW, Germany on 30th March, 2012 for availing ODA loan of EUR 100 million (approx Rs. 700 crore) for financing Renewable Energy Projects in the areas of Wind Power / Small Hydro Power /Biomass Cogeneration / Biomass Power / Solar PV / Solar Thermal & Energy Efficiency. The loan shall be drawn over the next five years i.e. upto December, 2017. Under KfW-I & KfW-II ODA loan of EUR 70 million each (approx. Rs. 454.02 crore & Rs. 480.97 crore each) has been fully drawn as on 31.03.2013 & KfW-III cumulative amounts of EUR 25 million (approx. Rs. 180.31 crore) has been drawn as on 31.03.2013. Under JICA-I& II ODA loans, cumulative amounts of JPY16,949.38 million (approx. Rs. 820.12 crore) and JPY 10,102.61 million (approximately Rs. 545.40 crore) respectively has been drawn as on 31.03.2013.

Further, during the Financial year 2012-13 the project activities under the 1st Line of Credit with Japan International Cooperation Agency (JICA) signed on 31st March 2006 for refinancing the Rural Electricity Distribution Backbone (REDB) Programme with the objective of improving the sub transmission system in rural areas in the states of Andhra Pradesh, Maharashtra and Madhya Pradesh, came to a close, and cumulative amount of JPY 16949.38 million (approx. Rs. 820.12 crore) has been drawn under the JICA-I line of credit.

Implementation of identified projects under the 2nd Line of Credit with JICA signed on 10th March, 2008 for refinancing the ''Haryana Transmission System Project'' with the objective of achieving stability in power supply by strengthening intra-state transmission systems in the State of Haryana is in under progress, and cumulative amount of JPY 10102.61 million (approx. Rs. 545.40 crore) has been drawn from JICA under this line of credit as on 31.03.2013. The loan amount under the JICA-II line of credit was revised from the initial outlay of JPY 20902 million to JPY 13000 million, mainly due to excess INR amount becoming available on account of exchange rate fluctuations.

Besides the above, for the first time in the country, the Company has successfully registered with United Nations Framework Convention for Climate Change (UNFCCC), under Clean Development Mechanism (CDM), the following two nos. of REC financed Energy Efficiency Projects of Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL), refinanced under the earlier ODA lines of credit from KfW Germany.

1. Energy Efficiency Programme in electricity distribution network in Tirupati and Puttur operational division of Andhra Pradesh.

2. Energy Efficiency Programme in electricity distribution network in Chittoor and Madanapalle operational division of Andhra Pradesh.

9. RAJIV GANDHI GRAMEEN VIDYUTI KARAN YOJANA

Government of India, launched the scheme "Rajiv Gandhi Grameen Vidyutikaran Yojana" (RGGVY)- Scheme of Rural Electricity Infrastructure and Household Electrification for providing access to electricity to all rural households. Under the scheme, 90% capital subsidy is being provided by Government of India for overall cost of the projects. REC is the Nodal Agency for overseeing the implementation of the Programme.

9.1 Electrification of villages and BPL Households

The initial approval was for implementation of the scheme for capital subsidy of Rs. 5000 crore during the last 2 financial years of X Plan period, vide Office Memorandum dated 18th March, 2005 by the Ministry of Power. Further, sanction for continuation of the scheme in XI Plan was conveyed by Ministry of Power vide Office Memorandum dated 6th February, 2008 with an outlay of Rs. 28000 crore as capital subsidy. In addition, a capital subsidy of Rs. 6000 crore was sanctioned in July, 2011 for phase II of RGGVY Programme in XI Plan.

Cumulatively upto 31st March, 2013, 648 projects covering electrification of 112795 un-electrified / de-electrified villages, intensive electrification of 396336 partially electrified villages and for providing free electricity connections to 2.74 crore BPL households costing Rs. 42475.41 crore have been sanctioned by the Ministry of Power, based on the recommendation of REC, for implementation. The state-wise details are furnished at Table-6. Cumulatively, works in 107083 un-electrified villages, 290137 partially electrified villages have been completed and free electricity connections to 2.07 crore BPL households have been provided under the scheme up to 31.03.2013. The state-wise details are furnished at Table-7. Cumulatively, 503 new 33/11Kv substations have been commissioned under the scheme.

During the financial year 2012-13, it has been reported that works have been completed in 2587 un-electrified villages, 41584 partially electrified villages and free electricity connections to 1296541 BPL households have been provided and 63 new 33/11Kv substations have been commissioned. Further, during the financial year under review, RGGVY Subsidy of Rs. 697.94 crore was disbursed by the Ministry of Power, Government of India, to REC.

9.2 Supplementary projects sanctioned under Phase-II of RGGW

The details of supplementary projects sanctioned under Phase-II of RGGVY during the financial year 2012-13 are given below:

(Rs.in crore)

Sl. Name of Date of Project Sanction Cost Fund No. Project sanction by (Revised) Released REC Loan Subsidy Total as on 11.07.2013

1. Kishanganj 17.36 156.27 173.63

2. Nalanda 11.05.2012 34.81 313.30 348.11 Nil

3. Patna 39.21 352.90 392.11

Total 91.38 822.47 913.85

9.3 Achievement of MoU Targets of RGGW

During the financial year 2012-13, Franchisees were deployed in 4410 villages under RGGVY project by the State Power utilities and Web based Monitoring of RGGVY projects was fully operationalised on 15th November, 2012. Further for the development of Franchisee, 4 workshops were carried out in Kolkata, Panchkula, Bhopal & Bangaluru, as per the requirement of the MoU.

10. RGGW - DECENTRALISED DISTRIBUTED GENERATION (DDG)

10.1 RGGVY provides grants for DDG projects from conventional or renewable non-conventional sources such as biomass, biogas, micro hydro, wind, solar etc. for villages where grid connectivity is either not feasible or not cost effective. Under the scheme, 90% capital subsidy is provided towards overall cost of the DDG projects under the RGGVY scheme, excluding the amount of state or local taxes, which is borne by the concerned State/State Utility. 10% of the project cost is to be contributed by states through own resources/ loan from financial institutions. A provision of Rs. 540 crore has been kept as subsidy under XI Five Year Plan.

10.2 The Guidelines for DDG projects under RGGVY were issued by Ministry of Power (MoP) on 12.01.2009. Amendments to DDG Guidelines were issued by Ministry of Power on 05.01.2011, 17.03.2011 and 18.03.2011 for more coverage and faster implementation of DDG projects and also for facilitation of DDG in Left Wing Extremism (LWE) affected districts.

10.3 During the financial year 2012-13, in the states of Andhra Pradesh and Uttarakhand, 21 DDG projects were sanctioned for total project cost of Rs. 7.58 crore. A total sum of Rs. 4.98 crore was disbursed for DDG projects during the financial year 2012-13. Most of the states are in the process of preparation of DPRs for DDG projects and some of the states are in the process of award and implementation of DDG projects. The state-wise details of DDG projects under RGGVY sanctioned and disbursed during the financial year 2012-13 are given below:

(Rs. in crore)

Sl. State Sanction No. No. of No. of No. of un No. of BPL Total Projects District electrified House- sancti oned villages holds Project / hamlets covered Cost covered

1. Andhra Pradesh 20 1 40 765 5.48

2. Uttarakhand 1 1 3 68 2.10

Total 21 2 43 833 7.58

State Disbursement

Subsidy Loan Total Amount Amount Disbursement

Andhra Pradesh 4.49 0.49 4.98

Uttarakhand - - -

Total 4.49 0.49 4.98

11. STANDARDISATION, QUALITY CONTROL & MONITORING

Your Company has continually provided technical expertise in the distribution system to State Power Utilities. The technical specifications and construction standards issued by the Company are used extensively by the State Power Utilities. The Company, in order to promote new technologies, has been continuously looking for innovations using latest R&D in the field of power distribution.

In line with the Three-Tier Quality Control Mechanism for ensuring proper quality of materials and works in implementation of RGGVY XI-Plan schemes, (i) REC Quality Monitors (RQM) under Tier-II have been appointed covering 341 projects in 25 states and (ii) National Quality Monitors (NQM), on behalf of Ministry of Power, have been appointed under Tier-III for the 332 projects covering 24 states of country. Further during the financial year 2012-13, RQMs have undertaken 117 Nos. of materials inspections and 6676 village / substation inspections and NQMs have undertaken 540 Nos. of village / substation inspections for ensuring quality of works.

12. PREFERRED CUSTOMER POLICY

As a part of business promotion strategy, a Preferred Customer Policy was formulated in 2008 with the basic purpose of offering an enhanced level of services to the Company customers and to have a long term mutually beneficial relationship with them. The policy lays down the eligibility criterion which takes into account various factors, such as, amount of loan outstanding, duration of loan relationship, repayment track record of the borrower etc, for determining preferred customers and sponsoring them for capacity building/domestic/ international seminars/training programmes organized by various external agencies as well as CIRE, Hyderabad.

13. JOINT VENTURE

REC, along with three other PSUs, namely Power Grid Corporation of India Limited, NTPC, and PFC as equal partners, has formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL) on December 10, 2009. Your Company has contributed Rs. 22.50 crore (being 25% of paid-up capital) upto 31st March, 2013. EESL is expected to take a lead in implementing energy efficiency projects, play a market creation role in promoting usage of energy efficient appliances, promote the concept of Energy Service Companies (ESCOs) and performance contracting, manage a partial risk guarantee fund to provide risk mitigation to ESCOs etc, besides taking over the current commercial roles being discharged by the Bureau of Energy Efficiency (BEE). Thus, EESL is expected to implement the recommendations under the National Mission for Enhanced Energy Efficiency (NMEEE) which is part of the National Action Plan for Climate Change (NAPCC). The business plan of EESL envisages taking up projects in Energy Conservation and Building Codes, Agriculture Demand Side Management (DSM), Municipal DSM, Bachat Lamp Yojana, besides taking up other functions.

14. ERP BASED INTEGRATED INFORMATION SYSTEM

14.1 All major business functions of the Corporation including Financials, Project, Disbursements, Management of Loan Accounts, Treasury functions, Payroll, CPF, Cash management, Banking, Purchases across all Offices are done through an integrated ERP system resulting in continuous & sustainable improvement of internal efficiency and greater customer satisfaction. During the period, the Scope of the system has been improved to include:

a) Introduction of new project categories like Renewal Energy, DDG, TFL, MTL etc.;

b) Interfacing of payment with RTGS system;

c) Improving customer service through automated generation of mail alerts from the system;

d) Improvement of IT setups by migrating the system to cluster based production environment for improved performance and availability; and

e) Introducing improved internal control in the ERP system by carrying out internal assessment of the ERP system by a committee and incorporation of the suggestions in the system.

14.2 REC has implemented Document Management System (DMS) within the Corporation. This involves digitization of documents including scanning, cleaning, Quality Control, Indexing, uploading and retrieving. The system has been extended to divisions of Corporate Office and Zonal & Project offices.

14.3 REC has implemented Workflow Management System (WMS) for electronic movement of note sheet approval along with attached document. The WMS system has been implemented at 2 divisions of Corporate Office, 1 Zonal office and 1 Project office, against the MoU Target for the financial year 2012-13.

14.4 A full-fledged Disaster Recovery Centre (DRC) for ERP operation has been launched at Hyderabad on 20.11.2012 for replication of data within pre-defined time frame against the MoU Target for the financial year 2012-13. DRC has been audited during ISO 27001:2005 certification.

14.5 Towards achieving efficient e-governance and transparency, REC has implemented on-line ''E-procurement'' system for procurement above Rs. 10 lakhs, web-based online submission of ''Annual Property Return'' etc. across the organization and Bill Payment Tracking System for tracking timely payment of bills to vendors in IT, Admin and Finance Divisions.

14.6 Disaster Recovery Center (DRC) at CIRE Hyderabad has been certified ISO/IEC 27001:2005 security standard, by British Standards Institution (BSI). The Primary Data Centre (PDC) is already ISO/IEC 27001:2005 certified.

14.7 REC has initiated implementation of HR-ERP solution to automate HR function including Employee Self Service module and integration with existing ERP System.

14.8 REC has initiated redesigning and revamping of existing static Corporate Website to an interactive and dynamic website.

14.9 To enhance the credibility of IT systems implemented in REC for internal control, various types of audits are periodically done by the third party. During the financial year 2012-13, the External audit of ERP Data Centre and Disaster Recovery Centre was done by a Computer Emergency Response Team (CERT)- certified audit agency and surveillance audit of ISO was done by ISO Certifying Agency-BSI India. In addition, after implementation of ERP system audit was also done by PricewaterhouseCoopers and Audit by Statutory Auditors, Audit by the office of CA & G, IT Asset verification and reconciliation audit, Internal IT audit etc. are done on periodical basis. Field level audit of IT system is also done on requirement basis.

15. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION

Central Institute for Rural Electrification (CIRE) was established at Hyderabad in 1979 under the aegis of REC to cater the training and development needs of engineers and managers of Power and Energy Sector and other organisations concerned with Power and Energy. The following programmes are conducted on the state-of-art subjects of Power Generation, Transmission and Distribution:

15.1. National Training Programmes (NTP) under RGGVY CIRE is designated as a nodal agency by MoP for implementation of National Training Programmes on Franchisee and C&D Employees under the Human Resources Development component of RGGVY programme. CIRE/REC has entered into MoUs with 30 Power Utilities/Training Institutes, to implement the training programme. During the financial year 2012-13, the following training programmes were conducted:

i) 15 Franchisee Programmes with 648 participants;

ii) 396 C&D Employee''s programmes with 9251 participants;

iii) 2 C&D Programmes with 50 participants for BSEB on "Distribution Transformers-Prevention of Failures and Repairs"; and

iv) 1 programme on usage of "Web Portal" for nodal officers.

15.2. R-APDRP Programme

CIRE as partner training institute, organized R-APDRP programme sponsored by MoP, through PFC. CIRE has conducted 27 R-APDRP programmes on different themes, viz. Efficiency Improvement Measures in Distribution System, Best Practices in Distribution Operation & Management System, Communication and Customer Relations with 418 participants from different power utilities.

15.3. DRUM Programmes

CIRE is empanelled as a training institute to organise DRUM training programmes, sponsored by Ministry of Power, GoI under the financial support of USAID, through Power Finance Corporation. CIRE has organised 12 DRUM training programmes as offsite programs to trained 347 participants from various power utilities in the country on different themes, viz., Best Practices in Distribution Systems Operation and Maintenance; Distribution Efficiency and Demand Side Management; Best Practices in Distribution Loss Reduction; Communication Skills, Employee Motivation and Moral Development; Disaster Management,

Electrical Safety Procedures and Accident Prevention and Financial Management in Distribution Business.

15.4. International Programmes

CIRE is empanelled by Ministry of External Affairs, Govt. of India to organise training programmes in the area of power sector under ITEC/SCAAP. During the financial year 2012-13, CIRE has organised 9 International programmes with 125 participants, on the various topics viz Planning and Management of Power Transmission and Distribution System, Financial Management and Accounting Systems for Power Companies, Planning and Financial Management of Power Projects, Upgrades of Power Utility Management using IT/Automated Solutions, Best Practices in Power Distribution Sector, Solar Power Generation-Grid Enabling, Latest Trends in Design, Erection, Operation, Maintenance and Protection Systems of EHV Substations, Decentralised Distributed Generation and Rural Power Distribution Management and Trends and Developments in Generation and Transmission Systems.

The participations in above international programmes were from various countries, viz., Afghanistan, Bangladesh, Burundi, Sri Lanka, Syria, Iraq, Nepal, Malawi, Cameroon, Tanzania, Philippines, Rwanda, Sudan, Sierra Leone, Vietnam, Laos, Lithuania, Mexico, Cambodia, Costa Rica, Egypt, Gambia, Guinea, Mauritius, Nigeria, Niger, Myanmar, Namibia, Yemen, Ethiopia, Zambia, Zimbabwe, Kenya, etc.

15.5. Regular and In-house Training Programmes

CIRE has organised 25 Regular Training Programmes with 308 participants from various Power Utilities/ Distribution Companies and 10 In-house training programmes for 122 executives of REC on the different topics viz. Generation & Transmission, Distribution, Renewable Energy, Finance & Commercial Aspects and Management.

16. RISK MANAGEMENT

16.1 Asset Liability Management

The Company has a Risk Management Policy which covers Asset Liability Management Policy and Hedging Policy. ALM Policy provides a framework for defining, measuring and monitoring the mismatches and Hedging Policy covers the management of currency risk.

An Asset Liability Management Committee (ALCO) is currently functioning under the Chairmanship of CMD and Director (Finance), Director (Technical), one Part- time Non Official Independent Director, Executive Directors and General Managers from Finance and Operating Divisions as its members.

ALCO monitors risks related to liquidity, interest rates and currency rates. The liquidity risk is being monitored with the help of liquidity gap analysis and the Committee manages the liquidity risk through a mix of strategies such as forward looking resource raising program based on projected disbursement and maturity profile. The interest rate risk is monitored through interest rate sensitivity analysis and managed through review of lending rates, cost of borrowings and the terms of lending & borrowing. Foreign currency risk associated with exchange rate and interest rate is managed through various derivative instruments.

16.2 Enterprise Risk Management

The Company has constituted a Risk Management Committee (RMC) which is currently functioning under the Chairmanship of Part-time Non Official Independent Director and Director (Finance) and Director (Technical) as its members, for monitoring the integrated risks of the Company. The main function of RMC is to monitor various risks likely to arise and to initiate action for mitigation of risk arising in the operation and other related matters of the Company. The company has identified its various risks and has taken various steps to mitigate them. The brief description of the same is as below:

i) Credit Risk

Credit risk is a risk inherent in the financing industry and involves the risk of loss arising from the diminution in credit quality of a borrower and the risk that the borrower will default on contractual repayments under a loan or an advance. To mitigate the same, the company follows systematic institutional and project appraisal process to assess the credit risk. These processes include a detailed appraisal methodology, identification of risks and suitable structuring and credit risk mitigation measures.

ii) Market Risk

Market risk is the potential loss arising from changes in market rates and market prices. Our primary market risk exposures result primarily from fluctuations in interest rates and foreign currency exchange rates. In order to mitigate the interest rate risk, company periodically review its lending rates based on our cost of borrowing. We then determine our lending rates based on prevailing market rates, our weighted average cost of funding and our post tax margins.

iii) Liquidity Risk

Liquidity risk is the risk of our potential inability to meet our liabilities as they become due. We face liquidity risks, which could require us to raise funds or liquidate assets on unfavourable terms. We manage our liquidity risk through a mix of strategies, including through forward-looking resource mobilization based on projected disbursements and maturing obligations.

iv) Foreign Currency Risk

Foreign currency exchange risk involves exchange rate movements among currencies that may adversely impact the value of foreign currency-denominated assets, liabilities and off-balance sheet arrangements. The Company manages foreign currency risk associated with exchange rate and interest rate through various derivative instruments. For this, the Company has put in place a Hedging Policy to manage risk associated with foreign currency borrowings.

v) Legal risk

Legal risk arises from the uncertainty of the enforceability of contracts relating to the obligations of our borrowers. This could be on account of delay in the process of enforcement or difficulty in the applicability of the contractual obligations. We seek to minimise the legal risk through legal documentation and forward-looking contractual provisions in the legal documents.

vi) operational Risk

Operational risks are risks arising from inadequate or failed internal processes, people and systems or from external events. We have continually strengthened our systems and procedures to recognise and reduce operational risk in our business.

17. ISO 9001:2008 QUALITY ASSURANCE

CERTIFICATION

Your Company has implemented Quality Management Systems as per ISO 9001:2008 standards in six major Divisions of Corporate Office and all Zonal / Project Offices across the country for claims processing.

18. HUMAN RESOURCE MANAGEMENT

In order to professionalize the Executive strength of REC and also to infuse fresh blood, 10 Executives were appointed through open advertisement and 2 Executives through campus recruitment drawn from premier Institutions empanelled for the purpose during the financial year. The total manpower of the Company as on 31.03.2013 was 648 employees which includes 430 executives and 218 Non-executives.

18.1 Reservation in Employment

The directives issued by the Government of India regarding reservations for SC/ST etc. in appointment and promotion to various posts were complied with. The group wise details of SC and ST employees out of the total strength as on 31.03.2013 are given below:

Group Total No. of SC ST employees

A 372(378) 34 (36) 11(9)

B 141(123) 19 (15) 2(3)

C 46(83) 8 (15) 0(0)

D 89(94) 27 (28) 1(2)

Total: 648(678) 88 (94) 14(14)

(Figures in bracket give the corresponding position in the previous year)

18.2 Training & Human Resource Development

As a means of equipping employees with a range of skills including their up-gradation and to enable them to perform their responsibilities, Training and HRD continued to receive priority during the financial year.

Training and Human Resource Development policy of the Company aims at sharpening business skills and competence required for better employee performance and provides all possible opportunities and support to the employees to improve their performance and productivity. Training is provided to promote better understanding of professional requirements as well as to sensitize them to socio-economic and political environment in which business is carried out. Training also helps employees benefit in spiritual, health and attitudinal change process.

Based on the needs assessed and as a means to meet them, the Company sponsored 134 employees to various training programmes, workshop etc. within the country and abroad. In addition, 29 training programmes were conducted in house, which were attended by 518 employees. Taken together, these initiatives enabled the company to achieve 2236 training man days and also to achieve excellent rating on MoU targets on this parameter. In order to enable them develop global exposure, several officers were deputed to various programmes abroad to countries like U.K., Singapore, South Africa, USA, Japan etc.

18.3 Employee Welfare

In order to provide improved healthcare facilities to the employees and their dependent family members, the Company has expanded the list of empanelled hospitals under Direct Payment Scheme by adding 12 more hospitals. Further, par time services of three specialized doctors were engaged to providing onsite medical facilities to employees. Two preventive health check-up camps were also organized in the Corporate Office premises for benefit of REC employees during the financial year 2012-13. The Company has also been funding sports & recreation equipments (like carom board etc.) for use in office premises to promote health and well-being of employees.

Sports Activities

During the financial year 2012-13, REC hosted an Inter-CPSU Chess Tournament and also sponsored its employees for various Inter-CPSU sports tournament including but not limited to Badminton, Table Tennis and Kabaddi tournaments organized by various Power Sector CPSUs under the aegis of Power Sports Control Board (PSCB).

18.4 Representation of Women Employees

As on 31st March, 2013, the Company had 104 permanent women employees, which represent 16.05 % of the total work force. There is no discrimination of employees on the basis of gender. A Women Cell has been in operation in the Company to look after welfare and all round development of women employees. International Women''s Day was celebrated by REC Women Cell on 8th March, 2013.

18.5 Industrial Relations

The Industrial Relations continued to be cordial and harmonious in the financial year 2012-13 also. There was no loss of man days on account of industrial unrest. Regular discussions were held with REC Employees Union and REC Officers Association. They were consulted on major issues affecting employee welfare. Commitment towards participative management is reflected by the fact that consensus could be reached on majority of issues. This has helped build an atmosphere of trust and cooperation resulting in the motivated workforce and continued improvement in business performance.

18.6 Public Grievance Redressal Machinery

In accordance with the guidelines issued by the Government of India, the Company has constituted a Grievance Redressal Committee to redress the grievances of officers and staff. The scope of the Committee has further been enlarged to cover Public Grievance also. One day during a week has been fixed as meetingless day to attend the grievances by the Heads of Divisions at Corporate Office as well as Zonal/ Project Offices and CIRE.

19. CORPORATE SOCIAL RESPONSIBILITY (CSR)

19.1 Approaches to Corporate Social Responsibility

During the financial year 2012-13, the Corporate Social Responsibility (CSR) initiatives were pursued with a view to integrate REC''s business operations with social processes while recognizing the interests of all stakeholders. CSR projects were linked with the principle of sustainable development. The strategic focus was aimed at CSR initiative towards fulfilling the National Plan goals and objectives including Millennium Development Goals ensuring the gender sensitivity, skill enhancement, entrepreneurship and employment generation by co-creating value with local institutions/people. While identifying CSR initiatives, the Company has adopted an integrated approach to address the community, societal and environmental concerns measured in terms of triple bottom line approach. CSR strategy has been developed with action plan in project-based accountability approach. Most of the CSR activities have been implemented in project-mode, with baseline survey and specified time-frame and identified milestones and periodic monitoring. Disbursement of allocated funds under CSR was linked with achievement of the milestones and deliverables.

19.2 Implementation of CSR Initiatives

CSR Budget @ 0.5% of Profit After Tax (PAT) of the previous year was allocated for CSR activities for the financial year 2012-13, amounting to Rs. 14.09 crore with the approval of the Board of Directors by passing a Board Resolution in their 385th Meeting held on 30th March 2012. Sustainable CSR projects were identified and sanctioned financial assistance aggregating to Rs. 18.87 crore in the five chosen heads, viz. Job oriented Skill Development, Rural Electricity Delivery Model, Education, Rural Industry Promotion and Promotional of Non-Conventional Energy sources and other heads.

Disbursement of an amount of Rs. 14.19 crore has been achieved during the financial year 2012-13 against the MoU target of Rs. 14.09 crore, thereby achieving the targets set under ''Excellent'' category for CSR initiatives. Details of the CSR activities taken up during the financial year 2012-13 and estimated number of targeted beneficiaries are as under:

Sl. Name of the Project Amount Estimated No. Head Disbursed Targeted (Rs. in lakh) Beneficiaries (in Nos.)

1. Skill Development 448.30 3900 leading to creation of employment opportunities

2. Rural Electricity 58.80 2750 Delivery model

3. Education 294.63 28870

4. Rural Industry 59.42 1200 Promotion

5. Promotion of Non- 166.17 118000 conventional Energy sources

6. Promotion of Health 306.81 95000 care including for old age and persons with disabilities

7. Project Based Others 31.30 21200

8. Misc. Expenditure -CSR 34.82 Impact Evaluation / need assessment studies & CSR Training etc.

9 Non-Project Based 49.76 3218

10 Grand Total 1418.71 274138

The following major project based CSR activities were initiated during the financial year 2012-13 with the help of specialised agencies in various parts of the country:

(i) Supporting "Skill development/up-gradation and job-oriented training leading to creation of livelihood opportunities" to 1000 rural/semi urban youth from SC/ST/OBC/economically weaker section of society including women from backward areas of UP, Bihar, Jharkhand, Chhattisgarh and Madhya Pradesh.

(ii) Supporting "Purchase and Deployment of 4 Nos. customized vehicles for providing cooked food to Government Schools in rural areas of Jaipur District, Rajasthan" under Mid-Day meal scheme towards achieving the millennium development goal of universal primary education.

(iii) Supporting the "Every Child Counts Project for Parents Participation in Children''s Education, including purchase and deployment of a mobile ''School on Wheels'' for bringing primary education to the doorstep of children of migrant workers at construction sites in Pune.

(iv) Supporting Setting up of 42 libraries in the government schools of Uttarkhand, Delhi and Chhattisgarh States.

(v) Supporting "Extending solar lighting service to 30 villages each in Assam and Odisha States" towards promoting greater environmental responsibility and encouraging development and diffusion of environmental friendly technologies.

(vi) Supporting "Distribution of Aids and Appliances to persons with disabilities" by organizing 10 camps located at Dumariaganj, Kaushambi, Sant Kabir Nagar districts of UP, Guna, Jabalpur and Gwalior district in MP, Khammam district in AP, Trichy in Tamil Nadu, Shirur in Maharashtra and Guwahati in Assam.

(vii) Supporting procurement and "Health Care Package i.e. Multi Facility Kit" to 40 Old Age Homes at 8 cities Mumbai, Kolkata, Chennai, Hyderabad, Bangalore, Lucknow, Chandigarh and Bhopal.

(viii) Supporting "Setting up sanitation facilities in 7 government schools of Sonepat District, Haryana State".

(ix) Supporting "Setting up Smart Green Power Project" in 22 un-electrified hamlets of Ratangarh & Sujangarh blocks, Churu district, Rajasthan.

(x) Supporting "Reviving Crafts Heritage and Providing Sustainable Livelihood to the Artisans in 5 districts in the State of Gujarat".

(xi) "Funding fees, school uniforms school bags braille slate, Perkin braillers & Taylor frames etc. for visually impaired school children" towards bringing them into mainstream with their counterpart sighted students.

19.3 Documentation

Detailed documentation relating to selection, appraisal and approval within the identified thematic areas, CSR approaches, policies, programmes, implementation, monitoring, expenditures, etc., including publicity material, dissemination material, has been maintained for various CSR projects.

19.4 Institutional Framework for CsR

The Committee of Directors of the Company, headed by an Independent Director, oversees the CSR activities and reviews them periodically in line with the direction of the Board of Director. Before sanction of financial assistance under CSR, each project is scrutinized by two levels of screening committees and progress report of the activities is submitted to the Committee of Directors for CSR and to the Board of Directors, REC.

Most of the CSR projects/initiatives of the Company are being carried out with the help of specialized agencies in line with their focus areas of operations, which are either empanelled with National CSR Hub/ any other accredited agencies and/or have past work experience with Government / semi-Government / autonomous organizations or through agencies which are PSUs / Government bodies, or by tying up with other PSUs.

During the financial year 2012-13, the Company also signed an MoU with the National CSR Hub, Tata Institute of Social Sciences (TISS); CSR activities of the Company and expenditures incurred during the year have been documented and made available to National CSR Hub, in compliance with DPE CSR Guidelines for CPSEs.

19.5 Monitoring and Evaluation of CSR Projects

With a view to ensuring completion of projects in line with achievement of the expected outcomes, project implementation is periodically monitored by the Company by various means including progress update reports, photographs, fund utilization certificates, site visits, interaction with the stakeholders, etc.

Evaluation of five chosen projects from the focus areas viz. Skill Development leading to creation of employment opportunities, Rural Electricity Delivery Model, Education, Rural Industry Promotion and Promotional of Non-Conventional Energy Sources, sanctioned during the financial year 2012-13 was conducted by Tata Institute of Social Sciences.

19.6 Awareness Creation and Capacity Building

The Company has taken several measures for generating awareness about CSR activities being undertaken amongst its employees, like involving them in monitoring of projects, supervising procurement and distribution of goods & services etc., and dissemination of information about CSR projects in their geographical areas. Posters/advertisements/ Press releases of CSR activities and success stories are disseminated across its offices from time to time. Information regarding CSR policies is also being posted on Company''s website.

As part of dissemination exercise, a Corporate Brochure compiling details of CSR initiatives and activities undertaken by the Company during the financial year 2012-13 was published in the month of June, 2013 and circulated to various stake holders.

Officials engaged in the CSR function were provided with training and re-orientation and were periodically exposed to seminars / workshops / consultative meetings on CSR. Capacity building programmes were conducted for generating awareness about CSR amongst the employees of the Company by the Indian Institute of Foreign Trade, an Institution accredited to National CSR Hub, as well as by Tata Institute of Social Sciences. An expenditure of Rs. 0.87 lakh has been incurred on training, etc. and was booked under the head of CSR Expenditure during the financial year 2012-13.

19.7 Awards & Recognition

During the financial year 2012-13, the Company was awarded the ''IPE-CSR Corporate Governance Award'' by The Institute of Public Enterprises, Hyderabad, in recognition of its best practices in CSR and the contribution made by an organization which has made a difference to the people and the community and played a role of responsible citizen. The IPE -CSR awards are endorsed by World CSR Congress, CMO Asia & Asian Confederation of Business.

19.8 way Forward

The Company has formulated its Policy on CSR and Sustainability, which is applicable from 1st April 2013, in pursuance of revised Guidelines on CSR and Sustainability for Central Public Sector Enterprises, issued by Department of Public Enterprises (DPE), and CSR & Sustainability initiatives during the financial year 2013-14 are being implemented accordingly.

20. SUSTAINABLE DEVELOPMENT INITIATIVES

20.1 In line with the recent focus of business organizations for adopting Sustainable Development (SD), the Corporation decided to undertake a few projects, in addition to its continuing obligations under the Corporate Social Responsibility, as mandated by the DPE Guidelines on Sustainable Development. These DPE Guidelines were issued before the beginning of this fiscal, based on which, the Board adopted a specific Sustainable Development Policy for REC and also constituted a three-member Designated Committee of Board of Directors to oversee the SD initiatives, in the first quarter of the financial year.

20.2 During the financial year 2012-13, SD projects in 5 broad categories were implemented in the campus of the Central Institute for Rural Electrification (CIRE) at Hyderabad, which is a training institute owned by REC. CIRE has a campus spread over about 14 acres of land out of which about 95185 sq.ft. is the constructed area. The projects implemented in CIRE covered broad areas of "Energy Audit", "Energy Management", "Bio-diversity Conservation", "Water Management" and "Training Programmes". All the projects were aimed at making CIRE campus energy efficient and eco-friendly in line with the principles of Sustainable Development. A brief of the five projects implemented at CIRE is as under:

(i) Energy Audit of CIRE Building - The National Productivity Council (NPC) was engaged for conducting ''energy audit'' of the entire CIRE campus. The NPC report has recommended a number of measures for reduction of energy consumption of the campus.

(ii) Energy Management - For the purpose of green energy generation and demonstration in the campus, projects viz. (a) 40 kWp Solar Photo Voltaic (SPV) power plant on the roof top, (b) 5 kWp Solar Water Pumping System (c) 25 Nos. Solar LED Street Lights and 1kWp Power pack were implemented at CIRE.

(iii) Bio-diversity Conservation - Afforestation and greening of CIRE campus, including professional landscaping of 2500 Sq Mtr area and planting of 1400 saplings was undertaken.

(iv) Water Management- In order to harvest rainwater, 2 nos large pits, each comprising of a percolation tank and sedimentation tank were constructed.

(v) Training Programmes under Sustainable Development - Short duration training programs targeted at participants from various stakeholders were conducted by CIRE to create awareness about sustainable development. About 111 persons attended the 5 programs which were conducted on the subject.

In addition to getting these projects implemented by expert external agencies like National Productivity Council (NPC), CPWD and NREDCAP, CIRE has also retained two expert independent agencies viz CII and Tata Projects for concurrent monitoring and for conducting final impact assessment. A total amount of Rs. 82.08 lakh has been spent during the financial year 2012-13 on the projects in CIRE.

20.3 In addition to the projects at CIRE, your Company decided to purchase the Renewable Energy Certificates (RECs) on voluntary basis. The Company recognized that a large amount of non-solar RECs were remaining unsold in the power exchanges, for most part of financial year 2012-13. Voluntary purchase of RECs is an acceptable way of promotion of renewable energy and therefore, the Company has also purchased of 16400 non-solar Renewable Energy Certificates (RECs) on voluntary basis, through the Indian Energy Exchange, which is represented by neutralization of carbon foot print equivalent to 16.4 Million Units of conventional energy, or avoided Green House Gas (GHG) emission equivalent to 13120 tons carbon dioxide (CO2) approximately. With this, the Company not only mitigated its own carbon foot-print but also lent a helping hand to the cause of green energy in the country.

Thus a total amount of Rs. 331.76 Lakh was spent by REC on the SD projects during fiscal 2012-13.

21. VIGILANCE ACTIVITIES

21.1 Vigilance Division continued its emphasis on "Preventive Vigilance" so as to enhance transparency and accountability in the systems and procedures. An IT based Bill Tracking system has been implemented in the Corporation. Vigilance Division reviewed its efficacy and gave suggestions to optimize the effectiveness of the system.

21.2 Chief Technical Examiner (CTE) type inspection was undertaken for awarded contracts and various suggestions like floating of tenders three months in advance, publication of advertisements in leading newspapers, verification of documents/Bank Guarantee etc. were given for further improvement and streamlining of tender procedure.

21.3 On persuasion of Vigilance Division, Resource Mobilization Manual has been approved and fully equipped dealing/treasury room has been operationalized by the Finance Division.

21.4 The details of Immovable Property Returns (IPR) of all Executives have been uploaded on REC''s Website and vigilance clearance has been linked with timely submission of IPRs. In addition to this, submission of Annual Property Returns has been computerized and employees now enter details of movable/immovable property online.

21.5 All HoDs of Corporate Office, Zonal Managers/CPMs were advised to strictly adhere to the instructions regarding centralized complaint handling system and forward any complaints received by them in original to the Vigilance Division in a sealed cover. HR Division was advised to expedite necessary action for implementation of HR Module (ERP).

21.6 As per directives of CVC, REC observed Vigilance Awareness Week from 29.10.2012 to 03.11.2012. Various activities were organized in the Corporate Office as well as at the Zonal Offices/ Project Offices and Central Institute for Rural Electrification, Hyderabad, to enlist the participation of the people at large.

Quiz (Multiple Choice Questions) and Essay Writing Competitions were organized for executives as well as non-executives of the Corporate Office and dignitaries were invited to sensitize REC employees with various facets of vigilance.

21.7 Inspections and field visits were regularly conducted by the Vigilance Division. Audit Reports were scrutinized from vigilance point of view. Training programmes on vigilance related matters were also organized for vigilance and non-vigilance officers at Corporate Office as well as at field offices. Agreed Lists and list of Officers of Doubtful Integrity were finalized. Prescribed periodical statistical returns were sent to CVC and MoP on time.

21.8 With a view to create awareness amongst employees about various facets of vigilance, issue of a Vigilance Bulletin consisting of important instructions of CVC/ MoP, initiatives, write up etc. was started w.e.f. April, 2012 on quarterly basis.

21.9 The performance of Vigilance Division was reviewed regularly by CVC, Board of Directors and CMD of REC in addition to constant reviews undertaken by CVO, REC in accordance with prescribed norms.

22. IMPLEMENTATION OF OFFICIAL LANGUAGE

22.1 It was yet another year of achievements in the area of Rajbhasha Hindi. The Corporation excelled in most of the targets fixed by Department of Official Language, Home Ministry in its Annual Programme 2012-13.

22.2 In order to encourage employees, all Incentive Schemes introduced by the Govt. of India have been implemented in the Corporation. During the year, Officers & Employees of the Corporation have shown keen interest in Hindi with the result that its usage has increased in day to day working.

22.3 During Hindi pakhwara organized from 14th September to 28th September, 2012, the following programmes were conducted:-

(i) The Corporation organized nine Hindi competitions separately for General Managers/ Executive Directors, Middle level Managers and Non-Executives as well as Sulekh Competition for Class IV employees.

(ii) To award prizes to the participants in Hindi Pakhwara, a Prize Distribution Function was organized on 06.11.2012. Dr. P. C. Tandon, Sr. Reader, Delhi University was the Chief Guest. Winners of these competitions & those who had done maximum Original work in Hindi Scheme 2012-13, were awarded Certificates of Merits & cash prizes.

(iii) Shri Surender Sharma and other Famous Hindi Poet Shri Hari Om Pawar, Smt. Sita Sagar charmed with their satirical poetry in Hindi and motivated all present to work in Rajbhasha. Dr. P. C. Tandon, Sr. Reader, Delhi University, in his address emphasized on the usage of Rajbhasha.

22.4 Inspections were carried out to assess the progressive use of Hindi in 11 Divisions of C.O. and suggestions were given to them to improve the shortcomings. During the year, inspection of 8 Project Offices has been carried out. A target of 25% inspection of Zonal/ Project Offices was set out in Annual Programme 2012-13 by Department of Official Language. Against this, the corporation has achieved more than the target prescribed for inspections.

22.5 Maintaining of required ratio in purchase of Hindi & English books for Library was ensured and the library has been equipped with a large number of Hindi literary books, magazines & reference publications.

22.6 Quarterly Hindi Magazine "REC Darpan" also launched/ published from June 2012.

22.7 REC''s website is available both in Hindi and English and is regularly being updated from time to time. Bilingual working facility has been made available on all computers. All publications, reports, memorandums, press releases, MoUs, tenders, annual report etc. were issued bilingually. To give impetus to the correspondence in Hindi, standard formats have also been made available on Intranet.

22.8 The Company has been honoured with RAJBHASHA SHREE SAMMAN by Bhartiya Rajbhasha Vikas Sanshthan, Dehradun during the financial year 2012-13.

22.9 Four quarterly review meetings of Official Language Implementation Committee were held during the financial year 2012-13 under the chairmanship of CMD, in which detailed discussion were held to review the progress and suggestion were made to overcome the difficulties in order to achieve the targets.

22.10 In order to increase use of Hindi by all in official work, nine Hindi workshops were organized in corporate office in which 112 officers and 79 employees were participated. Further, a separate Hindi work shop for two days organized on 24th & 25th August, 2012 at Chail, Distt. Solan Himachal Pradesh for the members of O.L.I. Committee of the Corporation in which 22 officers participated. It was inaugurated by Director (Finance). The Joint Director (O.L.) of Ministry of Power also attended it.

22.11 Zonal office Panchkula has been awarded third prize by NARAKAS, Chandigarh for doing excellent work in Hindi.

22.12 A "Hindi Nibandh" Competition was organized by the Corporation in its premises under the aegis of NARAKAS (Upkarm), Delhi on 19th November, 2012 in which 32 officers of different undertakings participated and NARAKAS has awarded shield and certificate to corporation for successfully conducting the competition. NARAKAS (Upkram), Delhi has also awarded "Vishesh Prashanha Puraskar" to the corporation for doing excellent work in Hindi.

22.13 The Parliament Committee on Official Language inspected REC''s Project Office, Hyderabad on 1st October 2012 to review the progress of Hindi made by Hyderabad office.

22.14 "A Dakshin Chhetriya Rajbhasha Sammelan" was organized on 6th July, 2012 at Amar Sewa Sangam, Aykudi, Tamilnadu for Zonal Managers/Chief Project Managers and Hindi nodal officers of southern region in which 12 officers participated in it.

23. FINANCIAL STATEMENTS / DOCUMENTS UNDER SECTION 212 OF THE COMPANIES ACT, 1956.

The Ministry of Corporate Affairs, Government of India, vide its Circular dated 8th February, 2011 has granted general exemption to all Companies from attaching the financial statements of its subsidiary companies, pursuant to Section 212(8) of the Companies Act, 1956, subject to compliance of certain conditions by the Companies as prescribed in this circular. Accordingly, copies of the balance sheet, statement of profit and loss and reports of the Board of Directors and auditors of the subsidiaries have not been attached with the balance sheet of the Company.

The Audited Financial Statements and related information of our other unlisted subsidiaries are available on the website of the Company www.recindia.gov.in under the head ''Financial Highlights''. However, these documents will be made available upon request by any member of the Company interested in obtaining the same. As directed by the Central Government, a statement containing the financial data of the other unlisted subsidiaries has been furnished along with the consolidated financial statements, which forms part of the Annual Report. The annual accounts of the Company including that of other unlisted subsidiaries will be kept for inspection by any member. Further pursuant to Accounting Standard-21 (AS-21) prescribed under the Companies (Accounting Standard) Rules, 2006, Consolidated Financial Statements presented by the Company include financial information about its subsidiaries.

24. PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO.

24.1 Conservation of Energy

There are no significant particulars relating to conservation of energy, technology absorption under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 as your Company does not own any manufacturing facility. However, the Company has made intensive use of technology in its operations during the year under review.

The Company''s Registered Office is located at "SCOPE Complex" where all civil, electrical installation & maintenance is carried by SCOPE and for Energy Conservation, the following steps have been taken by them:-

1. All the 32 Elevators have been replaced with Microprocessor based drive resulting in 30% reduction of energy consumption.

2. Water based heating of complex through Hot Water Boilers operated on pNg during winter have been provided in place of Strip Heaters in AHUs, resulting in lot of electrical energy saving.

3. All the Chilling Units, AHUs, Exhaust Ventilation Blowers have been provided with most energy efficient having low consumption.

4. Most of the Common areas including Convention Centre, Compound Lighting, Lower & Upper Basement, and Staircase have been provided with energy efficient lighting with LED, CFL etc. In order to reduce the losses, Capacitor Panel with APFC Relay has been provided to maintain Power Factor.

24.2 Foreign Exchange Earnings & outgo

No foreign exchange was earned during the financial year 2012-13. However, the Foreign exchange outgo aggregating Rs. 377.39 crore was made during the financial year on account of Interest, Finance Charges and other expenses:

25. SUBSIDIARY COMPANIES

To focus on additional business of consultancy in the areas of distribution, transmission etc. following wholly owned subsidiaries have been incorporated by your Company as on date:

(i) REC Power Distribution Company Limited (RECPDCL)

(ii) REC Transmission Projects Company Limited (RECTPCL)

Further, REC Transmission Projects Company Limited (RECTPCL) is designated by the Ministry of Power, Government of India as "Bid Process Coordinator" for different independent transmission projects. As on date the following project specific Special Purpose Vehicles (SPVs) have been incorporated as subsidiary Companies:

(i) Vizag Transmission Limited (VTL)

(ii) Kudgi Transmission Limited (KTL)

(iii) Nellore Transmission Limited (NTL)

(iv) Unchahar Transmission Limited (UTL)

(v) Baira Siul Sarna Transmission Limited (BSSTL)

(vi) NRSS XXIX Transmission Limited*

(vii) NRSS XXXI (A) Transmission Limited*

(viii) NRSS XXXI (B) Transmission Limited*

* Incorporated after 31st March, 2013.

25.1 REC Power Distribution Company Limited (RECPDCL) During the financial year 2012-13, RECPDCL completed milestone of Third Party Inspection (TPI) of 31,348 villages and 452 feeders under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and Feeder Renovation Programme (FRP) works respectively. The Company has carried out the TPI of 120 division substation Infra plan works for MSEDCL, Material Inspection for UHBVN, Cost Data Preparation for DERC, PMC work under RGGVY for PuVVNL, MRI based billing for PVVNL are also executed during the financial year 2012-13. New Initiatives includes TPI of works & workmanship executed by Turnkey Contractor under Infra Plan of 120 Division of Maharashtra by MSEDCL (Work awarded to RECPDCL based on competitive bidding), Project Management Consultancy (PMC) of PuVVNL Project (Work awarded to RECPDCL based on competitive bidding), Detailed Project Report (DPR) preparation of Rajasthan under RGGVY XII Plan and PMC work under National Electricity Fund (NEF) Scheme of DHBVN & UHBVN.

The performance of the company has improved significantly and the financial performance of the company is on the fast trajectory growth path. The company''s gross income during the financial year 2012-13 has increased to Rs. 30.61 crore compared to the previous year income of Rs. 23.28 crore. The Profit Before Tax (PBT) during the financial year 2012-13 has increased to Rs. 15.98 crore as compared to Rs. 12.86 crore in the previous year. The Profit After Tax (PAT) during the financial year 2012-13 has also increased to Rs. 10.81 crore as compared to Rs. 8.67 crore during the previous year.

25.2 REC Transmission Projects Company Limited (RECTPCL)

During the financial year 2012-13, RECTPCL concluded the process of selection of developer for Transmission System associated with IPPs of Vemagiri Area: Package-A for which a project specific SPV namely Vemagiri Transmission System Limited was incorporated by RECTPCL as its wholly owned subsidiary. M/s Power Grid Corporation of India Limited, who had emerged as the lowest Bidder, acquired 100% shares of Vemagiri Transmission System Limited on 18.04.2012 on payment of acquisition price amounting to Rs. 182.79 million which includes professional fee of Rs. 150 million.

During the financial year 2012-13, the Ministry of Power, GoI vide Gazette Notification dated October 8, 2012 nominated RECTPCL as the Bid Process Coordinator for selection of developer for five inter- State transmission systems with aggregate estimated cost of Rs. 26,600 million. These transmission systems are essentially for evacuation of power from new generating stations and augmentation / strengthening of inter-State transmission network. The details of the transmission systems allocated to RECTPCL are given below:

1. System Strengthening in Southern Region for import of power from Eastern Region; (This scheme was evolved by changing the scheme name and elements of earlier allocated transmission scheme titled ''Evacuation System for Vizag - Vemagiri Projects - Hinduja 1040 MW)'';

2. Transmission System required for evacuation of power from Kudgi TPS (3x800 MW in Phase-I) of NTPC Limited;

3. Transmission System for Connectivity for NCC Power Projects Ltd. (1320 MW);

4. Baira Siul HEP- Sarna 220 kV line; and

5. ATS of Unchahar TPS

In order to initiate development of each of the above listed transmission systems, RECTPCL has incorporated project specific Special Purpose Vehicle (SPV) for each of the transmission system. These project specific SPVs, of which one hundred percent (100%) equity shares shall be acquired by the Selected Bidder for respective Transmission Projects pursuant to the bidding process, shall be responsible as the Transmission Service Provider, for ensuring that it undertakes ownership, financing, development, design, engineering, procurement, construction, commissioning, operation and maintenance of the Project, and to provide Transmission Service on a long term basis to the Long Term Transmission Customers.

For each of the transmission system, a two stage Bidding process featuring separate Request for Qualification (RFQ) and Request for Proposal (RFP) has been initiated in accordance with tariff based competitive bidding guidelines of Ministry of Power, GoI for selection of developer as Transmission Service Provider. The bidding process for selection of developer for above mentioned projects is expected to conclude within the financial year 2013-14.

During the financial year ended 31st March, 2013, REC Transmission Projects Company Limited has been able to generate an income of Rs. 4.58 crore. The Profit before tax and Profit after tax for the year is Rs. 4.09 crore and Rs. 2.92 crore respectively. The Net Worth of RECTPCL has reached to Rs. 45.17 crore against initial capital injected by REC of Rs. 0.05 crore. For the year, the Board of Directors has recommended a dividend @ 200% on the par value of shares subject to approval of shareholders of the Company in the Annual General Meeting.

26. MOU RATING AND AWARDS

The performance of your Company in terms of Memorandum of Understanding (MoU) signed with the Ministry of Power, Government of India, for the financial year 2011-12 has been rated as "Excellent". This is the 19th year in succession that REC has received "Excellent" rating since the year 1993-94 when the first MoU was signed with the Government.

During the year, your Company received Award in the category of "Non-Banking Financial Services" by India Pride Awards, Dainik Bhaskar & DNA, DSIJ PSU Award 2012 for ''Fastest Growing Operational Matrix'' and 5th CIDC Vishwakarma Award 2013 in the category of "Achievement Award for Industry Doyel".

27. PARTICULARS OF EMPLOYEES UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956.

During the financial year 2012-13, no employee of the Company was drawing remuneration either on monthly or annual basis exceeding the limit as prescribed under Section 217(2A) of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975.

28. DIRECTORS'' RESPONSIBILITY STATEMENT

With reference to Section 217 (2AA) of the Companies Act, 1956, your Directors confirm that:-

(i) in the preparation of the Annual Accounts for the financial year 2012-13, the applicable Accounting Standards have been followed and no material departures have been made from the same;

(ii) such accounting policies have been selected and applied consistently and judgements and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

(iii) proper and sufficient care is taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the annual accounts have been prepared on a going concern basis.

29. GREEN INITIATIVE IN CORPORATE GOVERNANCE

As part of the Green Initiative in Corporate Governance, the Ministry of Corporate Affairs (MCA), Government of India, through its Circular Nos. 17/2011 and 18/2011, dated April 21, 2011 and April 29, 2011 respectively, has also allowed companies to send official Notices/documents to their shareholders electronically.

As a responsible Corporate Citizen, your Company has actively supported the implementation of ''Green Initiative'' circulars issued by Ministry of Corporate Affairs (MCA) on April 21, 2011 and April 29, 2011 and effected electronic delivery of Notice of Annual General Meeting (AGM) and Annual Report for the years ended March 31, 2011 and March 31, 2012 to those shareholders whose email ids were already registered with the respective Depository Participants (DPs) and downloaded from the depositories viz. NSDL/CDSL and who have not opted for receiving Annual Report in physical form. The intimation of Final/Interim Dividend paid after the issue of above circulars was also sent electronically to those shareholders whose email ids were registered.

Shareholders are requested to support the "THINK GREEN, GO GREEN" initiative of your Company by registering/ updating e-mails addresses for receiving electronic communications.

It is reiterated that upon receipt of requisition from the member including the members who have exercised the option of electronic delivery of these documents, every member of the Company is entitled to be furnished free of cost, with a copy of the Balance Sheet of the Company and all other documents required by law to be attached thereto, including the Statement of Profit and Loss and Auditors'' Report etc.

30. RIGHT TO INFORMATION ACT 2005

The Company has taken necessary steps for the Implementation of "Right To Information Act 2005 (RTI)" in REC and independent RTI Cell has been set up for coordinating the work relating to receipt of applications and furnishing information thereto. RTI Handbook, both in English and Hindi, has been placed on REC website which is updated periodically. The status of RTI applications during the financial year 2012-13 is given under:

Sl. No. Particulars Nos.

1. Applications received 190 (upto 31.3.2013)

2. Applications disposed off 184 (upto 31.3.2013)

3. Applications disposed off 6 subsequently

4. Appeals received by AA, REC 17

5. Appeals disposed off by AA, REC 15

6. Appeals received from CIC Nil

7. Appeals disposed off by CIC 1

31. STATUTORY AUDITORS

M/s Bansal & Co. Chartered Accountants, New Delhi and M/s P.K. Chopra & Co., Chartered Accountants, New Delhi, were appointed as Joint Statutory Auditors of your Company for the financial year 2012-13 by the Comptroller and Auditor General (C&AG) of India. The Joint Statutory Auditors have audited the Annual Financial Statements of the Company for the financial year ended 31st March, 2013.

31.1 Management''s Comments on the Joint statutory Auditors'' Report

The Joint Statutory Auditors of the Company have given an unqualified report on the financial statements of the Company for the financial year 2012-13. However, they have suggested that internal Control System needs to be further strengthened. The Management''s Reply to the suggestion / advice in respect of further strengthening the internal control system in certain areas, as mentioned in para (iv) of Annexure to the Independent Auditors Report are submitted as under:

Suggestions / Advice of Management''s Reply Joint Statutory Auditors

"In our opinion and according "Continuous efforts to information & explanations are being made to given to us, internal controls further strengthen the are generally commensurate internal control in the with the size of the Corporation said areas, wherever and the nature of its business. required." However in certain areas internal control needs further strengthening like utilization of grants / subsidy received under various schemes; monitoring and supervision of loans given to various SEBs / DISCOMS / TRANSCOS / GENCOS including obtaining search reports for charges created against the loans given, physical verification of assets charged to REC as security after Commercial Operations Date; regular updating of Loan module and generation of various reports from loan module in ERP to have better control over loan assets."

32. COMMENTS OF C&AG OF INDIA

The Comptroller and Auditor General (C&AG) of India, through letter dated June 30, 2013 has given ''NIL'' Comments on the Audited Financial Statements of your Company for the financial year ended March 31, 2013 under Section 619 (4) of the Companies Act, 1956. The Comments of C&AG for the financial year 2012-13 along with the Independent Auditors Report of Statutory Auditors of your Company have been placed elsewhere in this Annual Report.

33. SECRETARIAL AUDITORS

M/s Grover Ahuja & Associates, Practicing Company Secretaries, New Delhi, appointed as Secretarial Auditors by the Board of your Company for carrying out Secretarial Audit for the financial year 2012-13, have given an unqualified Secretarial Audit Report. A copy of the Secretarial Audit Report is annexed to this report.

34. STATUTORY AND OTHER INFORMATION

REQUIREMENTS

Information required to be furnished as per the Companies Act, 1956, Listing Agreement with Stock Exchanges, Government Guidelines etc. is annexed to this report as under:

Particulars Annexure

Management Discussion & Analysis Report I

Report on Corporate Governance II

Business Responsibility Report III

Statement pursuant to Section 212 (1) (e) IV of the Companies Act, 1956 relating to subsidiary companies.

Secretarial Audit Report issued by the V Secretarial Auditors of the Company

Auditor''s Certificate on Corporate VI Governance,

35. ACKNOWLEDGEMENTS

The Directors are grateful to the Government of India particularly the Ministry of Power & Ministry of Finance, the Planning Commission and the Reserve Bank of India for their continued co-operation, support and guidance in effective management of Company''s affairs and resources.

The Directors thank the State Governments, State Electricity Boards, State Power Utilities and other Borrowers for their continued support and trust in the Company.

The Directors also place on record their sincere appreciation for the continued support and goodwill of the esteemed Shareholders, Investors in REC Bonds, domestic and overseas Banks, Life Insurance Corporation of India, KfW of Germany and JICA of Japan in the fund raising programmes of the Company.

The Directors also thank Joint Statutory Auditors M/s Bansal & Co. and M/s P.K. Chopra & Co. Chartered Accountants, the Secretarial Auditors M/s Grover Ahuja & Associates and the Comptroller & Auditor General of India for their valued cooperation.

The Directors also sincerely appreciate and thank all the employees of the Company for their valuable contribution and dedicated efforts in steering the Company to excellent performance for yet another year in succession.

For and on behalf of the Board of Directors

(Rajeev Sharma)

Chairman & Managing Director

New Delhi

August 8, 2013

 
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