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Directors Report of REC Ltd.

Mar 31, 2021

The Directors have pleasure in presenting the Fifty Second Annual Report together with the Audited Financial Statements of your Company for the financial year ended on March 31, 2021.

1. PERFORMANCE HIGHLIGHTS

1.1 Summary of performance

The highlights of performance of your Company for the financial year 2020-21, with comparative position of previous year's performance, were as under:

(Rs.in crore)
Parameter	FY 2020-21	FY 2019-20
Loans Sanctioned	1,54,820.87	1,10,907.99
Disbursements	92,987.49	75,666.95
Subsidy under DDUGJY (including DDG) and SAUBHAGYA	4,940.62	6,473.88
Recoveries (including interest)	71,755.40	62,559.74
Total Operating Income	35,387.89	29,765.21
Profit Before Tax	10,756.13	6,983.29
Profit After Tax	8,361.78	4,886.16
Total Comprehensive Income	8,818.30	4,336.37

1.2 Â Â Â Financial performance

The Total Operating Income of your Company for the financial year 2020-21 was '35,387.89 crore, as compared to '29,765.21 crore during the financial year 2019-20. The Profit After Tax and Total Comprehensive Income for the financial yearÂ 2020-21 were '8,361.78 crore and '8,818.30 crore respectively, as compared to '4,886.16 crore and '4,336.37 crore for theÂ financial year 2019-20.

The Gross Loan Asset Book of your Company as on March 31,2021 was '3,77,418.15 crore, as compared to '3,22,424.68 crore as on March 31, 2020. The outstanding borrowings as on March 31, 2021 were '3,22,511.05 crore.

Earnings Per Share and Book Value per share for the financial year ended on March 31, 2021 were '42.34 and '219.89 respectively. Net Worth of the Company as on March 31,2021 increased to '43,426.37 crore, i.e., 23.80% higher thanÂ the Net Worth of '35,076.56 crore as on March 31, 2020.

1.3 Â Â Â Impact of Covid-19

India just grappled with the second wave of Covid-19, while more waves are predicted to hit the health as well as economic front. Your Company has not experienced any significant impact on its liquidity position, owing to strong credit profile andÂ access to diversified sources of borrowings. There are adequate liquidity buffers in the form of working capital and term loanÂ limits from various banks, apart from High Quality Liquid Assets.

As a part of its Covid-19 relief package, the Government of India had announced liquidity injection to State discoms in the form of State Government guaranteed loans through REC and PFC, to clear out outstanding dues of power generation andÂ transmission companies. Under this scheme, REC has sanctioned loans of '60,191.36 crore and disbursed an amount ofÂ '39,115.50 crore to various discoms, during the financial year 2020-21.

In accordance with RBI's directives, your Company has put in place a Board approved policy to refund / adjust interest on interest charged to borrowers during the moratorium period, i.e., March 1, 2020 to August 31, 2020. The Company has alsoÂ made provision in the financial statements for the year ended March 31,2021. Accordingly, interest income for the year endedÂ March 31, 2021 is lower by '129.25 crore. Considering REC's comfortable liquidity position and access to diverse sourcesÂ of funds, there are no reasons to believe that the current crisis will have any significant impact on the Company's ability toÂ maintain its operations, including the going concern assessment.

1.4 Â Â Â Dividend

The Board of Directors of your Company had declared an Interim Dividend of '6/- per equity share and 2^ndÂ Interim Dividend of '5/- per equity share of '10/- each, for the financial year 2020-21, which have been paid in December 2020 and March 2021Â respectively.

Further, the Board of Directors has also recommended a Final Dividend of '1.71 per equity share of '10/- each, which is subject to approval of the shareholders at the ensuing Annual General Meeting. If approved, the total dividend for the financialÂ year 2020-21 would amount to '12.71 per equity share of '10/- each, representing 127.10% of the paid-up share capital of theÂ Company, which is higher than the dividend of 110% paid for the last financial year, i.e., dividend of '11/- per equity share ofÂ '10/- each paid for the financial year 2019-20. The total dividend pay-out for the financial year 2020-21, including the proposedÂ Final Dividend, would amount to '2,510.12 crore.

The dividend is paid in accordance with the Company's Dividend Distribution Policy, which is available atÂ https://www.recindia.nic.in/uploads/files/Dividend Distribution Policy.pdf.

1.5 Share capital

As on March 31, 2021, the Authorized Share Capital of the Company was '5,000 crore, consisting of 500 crore Equity Shares of '10/- each. The Issued and Paid-Up Share Capital of the Company was '1,974.92 crore, consisting of 197,49,18,000Â Equity Shares of '10/- each. As on March 31, 2021, 52.63% of the paid-up equity share capital of the Company comprisingÂ of 103,94,95,247 Equity Shares of '10/- each were held by Power Finance Corporation Limited, a Government of IndiaÂ undertaking. The balance 47.37% of paid-up equity share capital was held by public.

2. Â Â Â LOANS SANCTIONED

During the financial year 2020-21, the Company sanctioned loans worth '1,54,820.87 crore, as against '1,10,907.99 crore in the previous financial year. The cumulative loans sanctioned by your Company since inception in 1969 till March 31, 2021,Â were '12,54,570.32 crore.

The loans sanctioned for the financial year 2020-21 included '39,613.53 crore towards Generation projects, '17,171.34 crore towards Renewable Energy projects, '19,492.75 crore towards T&D projects, '60,191.36 crore towards liquidity infusionÂ scheme of the Government of India underÂ Atmanirbhar BharatÂ and '4,750.00 crore towards other loans including short-termÂ and medium-term loans. Further, outstanding dues of '13,601.89 crore on which moratorium was extended pursuant to RBIÂ directive and Board approved moratorium policy, are also included in the above sanctions.

3. Â Â Â DISBURSEMENTS

During the financial year 2020-21, the Company disbursed total sum of '92,987.49 crore, as against '75,666.95 crore in the previous financial year. The disbursements for financial year 2020-21 included '25,929.76 crore towards Generation projects,Â '3,265.13 crore towards Renewable Energy projects, '19,301.22 crore towards T&D projects, '39,115.50 crore towardsÂ liquidity infusion scheme of the Government of India underÂ Atmanirbhar BharatÂ and '3,900.79 crore towards other loansÂ including short-term and medium-term loans. The disbursements also included '1,475.09 crore of counter-part funding underÂ DDUGJY, DDUGJY-DDG and SAUBHAGYA schemes of the Government of India.

Apart from the above, the Company also disbursed total subsidy of '4,940.62 crore from the Government of India during the financial year 2020-21, i.e., '4,527.01 crore under DDUGJY, '25.49 crore under DDUGJY-DDG and '388.12 croreÂ under SAUBHAGYA schemes. The cumulative amount disbursed by your Company since inception till March 31, 2021 wasÂ '6,90,109.36 crore, excluding subsidy disbursed under various Government programmes.

4. Â Â Â RECOVERIES

4.1Â Â Â Â Your Company gives utmost priority to timely realization of its dues towards principal, interest etc. During the financial yearÂ 2020-21, the amount due for recovery including interest for Standard Assets (Stage I & II) was '71,680.23 crore (which alsoÂ includes '13,601.89 crore as per Covid-19 moratorium policy), as compared to '62,340.60 crore during the previous financialÂ year. The Company recovered a total sum of '71,424.90 crore towards Standard Assets (Stage I & II) during the year, as againstÂ '61,945.04 crore in the previous financial year. The Company achieved recovery rate of 99.64% for the financial year 2020-21.Â The overdues from defaulting borrowers pertaining to Standard Assets (Stage I & II) as on March 31,2021 were '1,112.46 crore.Â Further, an amount of '330.50 crore has been recovered from Credit Impaired Assets (Stage III) in the financial year 2020-21,Â as compared to '614.69 crore recovered in the previous financial year.

4.2Â Â Â Â Your Company's Credit Impaired Assets (Stage III) continue to be at low levels. As on March 31, 2021, the Gross CreditÂ Impaired Assets (Stage III) were '18,256.93 crore, which is 4.84% of Gross Loan Assets; and Net Credit Impaired AssetsÂ (Stage III) were '6,465.61 crore, which is 1.71% of the Loan Assets.

4.3 Â Â Â Stressed Asset Management

REC has created a separate divisionÂ viz.Â Stressed Asset Management (SAM) Division, for dedicated approach towards resolution of stressed assets through various frameworks, like RBI framework or resolutions under Insolvency and BankruptcyÂ Code (IBC) etc. Due to this effort, REC has been able to contain the NPAs at minimum level, i.e., one of the lowest among peerÂ organizations in power sector.

During the financial year 2020-21, REC successfully resolved and upgraded 3 stressed power projects with total exposure amounting to '3,923 crore, as per details given below:-

Sl. no.	Name of the borrower and project	REC s exposure (? in crore)	Remarks
1	Essar Power Transmission Company Limited (inter-state transmission project)	1,111	Resolved outside IBC by implementation of Restructuring Plan
2	Facor Power Limited (100 MW captive power plant in Odisha)	511	Resolved under IBC
3	RKM Powergen Private Limited (1440 MW thermal power plant in Chhattisgarh)	2,301	Resolved outside IBC by implementation of Restructuring Plan

5. FINANCIAL REVIEW

5.1 Summary of Financial Results

The summary of audited financial results of the Company for the financial year 2020-21, vis-a-vis the previous financial year, is given as under:

(' in crore)
Particulars	Standalone		Consolidated
Particulars	FY 2020-21	FY 2019-20	FY 2020-21	FY 2019-20
Revenue from Operations	35,387.89	29,765.21	35,552.68	29,903.93
Other Income	22.55	63.92	22.72	77.27
Total Income	35,410.44	29,829.13	35,575.40	29,981.20
Finance Costs	21,489.08	18,997.05	21,489.05	18,991.30
Net translation/transaction exchange loss	330.26	2,357.90	330.26	2,357.90
Fees and Commission Expense	9.95	25.44	9.95	25.44
Net loss on fair value changes	-	-	-	-
Impairment on financial instruments	2,419.62	889.56	2,445.94	919.49
Other Expenses	405.40	575.89	518.64	666.23
Total Expenses	24,654.31	22,845.84	24,793.84	22,960.36
Share of Profit/Loss of Joint Venture accounted for using equity method	-	-	(197)	9.14
Profit Before Tax	10,756.13	6,983.29	10,779.59	7,029.98
Tax Expenses	2,394.35	2,097.13	2,401.35	2,057.71
Profit After Tax	8,361.78	4,886.16	8,378.24	4,972.27
Other Comprehensive Income for the period	456.52	(549.79)	457.76	(553.85)
Total Comprehensive Income	8,818.30	4,336.37	8,836.00	4,418.42
Add: Opening Balance of Retained Earnings and Other Comprehensive Income	3,085.17	5,036.27	3,347.20	5,226.53
Amount available for appropriation	11,903.47	9,372.64	12,183.20	9,644.95
Less: Appropriations	Â	Â	Â	Â
Special Reserve created u/s 36(1)(viii) of the Income Tax Act, 1961	(2,563.13)	(1,522.32)	(2,563.13)	(1,522.32)
Reserve for bad and doubtful debts u/s 36(1)(viia) of the Income Tax Act, 1961	(288.13)	(336.52)	(288.13)	(336.52)
Reserve Fund u/s 45-IC of Reserve Bank of India Act, 1934	(1,673.00)	(978.00)	(1,673.00)	(978.00)
Debenture Redemption Reserve	-	(49.15)	-	(49.15)
General Reserve	(981.10)	-	(981.10)	-
Impairment Reserve	-	(793.29)	-	(793.29)
Issue expenses on Perpetual Debt Instruments (net of taxes)	(0.70)	-	(0.70)	-

Particulars	Standalone		Consolidated
Particulars	FY 2020-21	FY 2019-20	FY 2020-21	FY 2019-20
Sub-total - Appropriations	(5,506.06)	(3,679.28)	(5,506.06)	(3,679.28)
Less: Dividend Payments to Owners (including related taxes)	Â	Â	Â	Â
Dividend	(2,172.41)	(2,172.41)	(2,172.41)	(2,172.41)
Dividend Distribution Tax	-	(435.78)	-	(446.06)
Sub-total - Dividend Payments to Owners (including related taxes)Â See Note	(2,172.41)	(2,608.19)	(2,172.41)	(2,618.47)
Closing Balance of Retained Earnings and Other Comprehensive Income	4,225.00	3,085.17	4,504.73	3,347.20

Note:Â Apart from the above, the Board of Directors has recommended a Final Dividend of '1.71 per equity share of '10/- each for FY 2020-21, which is subject to approval of shareholders at the ensuing AGM.

5.2Â Â Â Â Contribution to National Exchequer

During the financial year 2020-21, your Company contributed an amount of '2,721.64 crore to the National Exchequer, which included '2,694.33 crore towards direct taxes and '27.31 crore towards GST. In the previous financial year, the total contributionÂ to National Exchequer was '2,214.12 crore.

5.3 Â Â Â Ratio analysis

A comparative statement of significant ratios of the Company for the financial year 2020-21 vis-a-vis the previous financial year, is given below:

Particulars	FY 2020-21	FY 2019-20
Earnings Per Share (')	42.34	24.74
Return on Average Net Worth (%)	21.30	14.09
Book Value per Share (')	219.89	177.61
Debt Equity Ratio (times)	7.40	7.94
Price Earnings Ratio (times)¹	3.10	3.59
Interest Coverage Ratio (times)	1.50	1.37

Green Bonds issued by REC

Towards realization of the Hon'ble Prime Minister's vision to harness green energy's enormous potential in the country, REC raised USD 450 million Green Bonds in July 2017, for a tenure of ten years, which are listed on the International SecuritiesÂ Market (ISM) segment of London Stock Exchange and also on Singapore Stock Exchange.

Use of Proceeds:Â The proceeds have been utilized to finance solar, wind and renewable purchase obligations, including refinancing of eligible projects as defined in the Green Bond framework of REC, contributing to positive environmental impactÂ and also strengthening the country's energy security by reducing fossil fuel dependency.

KPMG India has provided post-verification Independent Assurance Report based on the Green Bond framework of REC and the same has also been certified by Climate Bonds Standard Board of Climate Bond Initiative on July 17, 2018.

In accordance with the Green Bond framework, REC has created a 'Green Portfolio' managed through a well laid internal tracking system, which is updated on regular basis, to monitor, establish and account for the allocation of proceeds for suchÂ Green Portfolio.

Managements of Proceeds:Â The outstanding amount in respect of Green Bonds amounting to USD 450 million (~'3,308 crore as on March 31, 2021) were allocated against the following projects.

(' in crore)
Sl. no.	Location	Capacity (in MW)	Loan sanction date	Loan sanction amount	Outstanding amount on March 31,2021
Solar
1	Karimnagar, Telangana	15	11.11.2016	89.84	71.04
2	Telangana	30	21.09.2016	179.62	148.35
3	Telangana	30	21.09.2016	179.62	148.68
4	Warangal, Telangana	15	11.11.2016	89.84	71.24
5	Andhra Pradesh	500	24.02.2016	2,480.00	1,777.69
6	Karimnagar, Telangana	15	11.11.2016	89.84	71.01
7	Kadapa, Andhra Pradesh	50	12.04.2017	277.50	232.27
8	Kadapa, Andhra Pradesh	50	12.04.2017	277.50	230.86
9	Kadapa, Andhra Pradesh	50	12.04.2017	277.50	232.22
10	Randa Reddy, Telangana	5	27.01.2016	26.90	22.15
11	Medak, Telangana	7	26.11.2015	39.90	31.25
12	Karimnagar, Telangana	15	11.11.2016	89.84	71.03
13	Nirudanagar, Tamil Nadu	5	14.07.2015	26.13	19.69
14	Chitradurga, Karnataka	30	17.04.2017	150.39	134.44
15	Mansa and Sangrur, Punjab	50	21.05.2016	169.69	148.12
Â	SUB-TOTAL (A)	Â	Â	4,444.11	3,410.04
^Vind
1	Mandasaur, Madhya Pradesh	20	28.01.2016	86.63	61.97
2	Tirpur, Tamil Nadu	6.8	06.06.2012	26.16	18.01
Â	SUB-TOTAL (B)	Â	Â	112.79	79.98
Renewable Purchase Obligations
1	Maharashtra	RPO	24.07.2017	500.00	187.50
Â	SUB-TOTAL (C)	Â	Â	500.00	187.50
Â	GRAND TOTAL (A+B+C)	Â	Â	5,056.90	3,677.52

REC is compliant with the requirements of Green Bond framework as per its continuing obligations, to ensure that the amount raised from Green Bonds remains invested in the eligible projects, as per the Green Bond framework during tenure of the bonds.

For its day-to-day operations, the Company has an approved cash credit / WCDL / OD limit of '18,299.50 crore from various banks, out of which '13,187.00 crore was availed as on March 31, 2021.

5.5 Â Â Â Domestic and International Credit Rating

Domestic

The domestic debt instruments of REC continued to enjoy âAAAâ rating, the highest rating assigned by CRISIL, CARE, India Ratings & Research and ICRA-credit rating agencies.

International

REC enjoys international credit rating from international credit rating agencies Moody's and FITCH of âBaa3â and âBBB-â respectively.

5.6 Â Â Â Cost of borrowing

The overall weighted average annualized interest rate of borrowing raised during the financial year 2020-21 and for the borrowings outstanding as on March 31, 2021, excluding other finance charges were 5.89% and 6.85% respectively. Further,Â the weighted average annualized interest rate of long-term borrowings raised during the year was 6.24%. As a result, yourÂ Company was able to deliver debt financing at competitive rates.

5.7 Â Â Â Redemption and pre-payment

During the financial year 2020-21, the Company repaid a sum of '58,908.07 crore. This includes repayment amounting to '26,342.13 crore towards Institutional Bonds, '9,565.23 crore towards Capital Gain Tax Exemption Bonds, '5.39 croreÂ towards Infrastructure Bonds, '10,312.77 crore towards External Commercial Borrowings, '7,266.21 crore of FCNR loansÂ and '206.34 crore of Official Development Assistance (ODA) loan. The Company also repaid long term loans '5,210.00 croreÂ to banks.

5.8 Â Â Â Financial status at the close of the year

At the close of the financial year 2020-21, the total resources of your Company stood at '4,00,233.19 crore. Out of this, equity share capital contributed '1,974.92 crore, instruments entirely equity in nature comprised '558.40 crore, other equity includingÂ Reserves & Surplus stood at '40,893.05 crore, financial liabilities including borrowings and other financial liabilities accountedÂ for '3,56,571.73 crore and non-financial liabilities including provisions stood at '235.09 crore. These funds were deployed asÂ financial assets including long-term/short-term loans, investments etc. of '3,96,951.24 crore and non-financial assets includingÂ property, plant & equipment, tax assets etc. of '3,281.95 crore.

With a view to create long-term value for stakeholders and in line with the prevalent statutory requirements, the Company has strengthened its policy framework by introduction and revision of various policies and schemes during the financial yearÂ 2020-21. This included policies for business operations during the pandemic, such as deferment of principal instalmentsÂ and/or interest in shifting of repayment schedule under Covid-19, scheme for special long term transition loans to discomsÂ under Covid-19, scheme for special loans to discoms within UDAY limits and scheme for special transition loan to discoms inÂ exemption of UDAY limits.

The Company also introduced and reviewed its policies with respect to renewable energy business, which included policy for Letter of Undertaking for renewable energy projects, modification in Renewable Energy Guidelines on grading of State powerÂ utilities, revision of appraisal guidelines (project and entity) for renewable energy projects and modification in re-financingÂ policy for renewable energy projects.

REC's existing KYC Guidelines were also reviewed and accordingly, the Company notified its revised Prevention of Money Laundering and Know Your Customer Policy. The Company has nominated a designated director and principal officer to ensureÂ compliance with the said policy.

Other policies approved by the Board during the year included policy for computation of Expected Credit Loss, policy for offering revolving bill payment facility to discoms and gedcos, policy for raising of funds through Perpetual Debt Instruments,Â review of policy for investment of short-term surplus funds, amendment in CSR & Sustainability Policy and review of FairÂ Practices Code.

Further, in line with industry trends and to pass on the benefit of lower interest rates to the borrowers, the Company has reduced its interest rates across various categories.

6. PRESENT TRANSMISSION & DISTRIBUTION SCENARIO

As the country's installed generation capacity is at a high of 382 GW (as on March 31, 2021) and there are huge capacities planned in the renewable energy space, the Transmission and Distribution (T&D) sector is poised to witness growth. ThereÂ is also a need to strengthen the technically old and aging distribution infrastructure. Need of the hour is to install a state-of-the-art robust and reliable evacuation and distribution system, capable of handling higher loads. Distribution is all the moreÂ a focus area, with accomplishment of targeted household connections under the Government of India's flagship programmeÂ SAUBHAGYA. Therefore, T&D segment shall play a significant role in making the sector reliable, affordable and capable ofÂ absorbing envisaged future growth.

Your Company, as the nodal agency to various schemes of the Ministry of Power, Government of India, plays an active role in creating new infrastructure and augmentation/strengthening of the existing network. Your Company finances entire gamut ofÂ transmission and distribution projects, broadly with the objectives of system improvement and augmentation, loss reductionÂ measures, IT based system implementation, consumer satisfaction etc., thus playing a significant role in the development andÂ sustainability of the power sector and overall socio-economic progress of the country.

6.1 Major reforms in the Distribution Sector

The outbreak of Covid-19 pandemic in the country and consequent nationwide lockdown imposed by the Government aggravated the liquidity problems of power sector. The Government of India announced a liquidity infusion scheme underÂ AtmanirbharÂ BharatÂ on May 13, 2020, followed by an advisory issued by the Ministry of Power (MoP) on May 14, 2020, envisaging fundingÂ by REC and PFC to discoms for clearance of their outstanding dues towards CPSU gencos & transcos, independent powerÂ producers and renewable energy generators as on March 31, 2020. Further, MoP vide OM dated September 2, 2020 alsoÂ granted one time permission to REC and PFC to extend loans to discoms above UDAY limits, for clearance of outstandingÂ dues of CPSU gencos & transcos, independent power producers and renewable energy generators as on June 30, 2020.Â Implementation of the aforesaid schemes has significantly improved the liquidity situation of discoms during the pandemic.

Further, various schemes and programmes have been implemented by the Government in the recent past, to improve the financial and operational performance of discoms. The policy framework of Government to support distribution sector includesÂ initiatives like Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA),Â Ujwal DISCOM Assurance Yojana (UDAY), Integrated Power Development Scheme (IPDS), National Electricity Fund (NEF),Â Smart Grid, Automatic Meter Reading etc. Many more initiatives are in pipeline, to provide reliable and better power supply toÂ the consumers.

Your Company encourages discoms to expedite various reform measures and to adopt best practices, including modernization and automation of systems and smart grid, IT-enabled systems for metering and consumer services and other technologicalÂ interventions in the distribution sector. Your Company is also the nodal agency for implementation of DDUGJY, operationalizationÂ of SAUBHAGYA and NEF schemes. Further, your Company has been instrumental in development of Power For All web-portalÂ and is engaged in assisting the Ministry of Power in this endeavor.

The Government of India's facilitating power to all and improving operational and financial performance of the utilities has already started showing results in terms of timely notification of tariffs by Regulators in many States, filing of MYT petitions,Â claiming of return on equity in the ARR, release of revenue subsidy by State Government etc. The â24x7 Power For AllâÂ document signed by all States reflects the commitment to work towards achieving the very objective for providing electricityÂ across the country.

6.2 Â Â Â National Electricity Fund

REC is the nodal agency for operationalization of National Electricity Fund (NEF), an interest subsidy scheme having provision of '8,466 crore (against interest subsidy and other incidental expenses), to be provided over 14 years against interest paid onÂ loan disbursements amounting to '23,973 crore for distribution schemes sanctioned during two financial yearsÂ viz.Â 2012-13Â and 2013-14. The Ministry of Power, Government of India provides interest subsidy on interest paid for loans availed by StateÂ power utilities / distribution companies, both in public and private sector, to improve the infrastructure in distribution sector.

In this reform-linked scheme, an interest subsidy of 3% to 7% is payable to discoms, on achievement of reform-based parameters outlined in NEF Guidelines. The utilities from the states of Andhra Pradesh, Chhattisgarh, Gujarat, Haryana,Â Himachal Pradesh, Karnataka, Maharashtra, Madhya Pradesh, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttarakhand andÂ West Bengal have already benefitted from this scheme, with interest subsidy of '448.70 crore released till March 31, 2021.

6.3 Â Â Â Deendayal Upadhyaya Gram Jyoti Yojana

REC is also the nodal agency for operationalization of Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), the flagship scheme of the Government of India covering all aspects of rural power distribution. All un-electrified villages/habitations,Â irrespective of population criteria, are covered for electrification in accordance with the Guidelines of the scheme. All erstwhileÂ ongoing rural electrification schemes have been subsumed in DDUGJY In a landmark achievement, all remaining un-electrifiedÂ census inhabited villages in the country became electrified as on April 28, 2018.

DDUGJY facilitates towards achievement of '24x7 Power For All' in the rural areas of India, through the following project components:

a) Â Â Â Separation of agriculture and non-agriculture feeders facilitating continuous quality power supply to non-agriculturalÂ consumers and adequate power supply to agricultural consumers;

b) Â Â Â Strengthening and augmentation of sub-transmission and distribution infrastructure;

c) Â Â Â Micro-grid and off-grid distribution network;

d) Â Â Â Metering of distribution transformers/feeders/consumers; and

e) Â Â Â Rural Electrification component (including the erstwhile RE projects).

Under the scheme, 60% of the project cost (85% for special category States) is provided as grant by Government of India and additional grant up to 15% (5% for special category States) on achievement of prescribed milestones. In order to realizeÂ the objectives of the scheme, participation of all stakeholders, particularly public representatives, has been institutionalizedÂ through constitution of District Development Coordination and Monitoring Committee (DISHA) (the erstwhile District ElectricityÂ Committees) under the Chairmanship of the senior-most Member of Parliament. DISHA has been empowered to monitor andÂ review implementation of DDUGJY

The scheme has an approved outlay of '43,033 crore, including budgetary support of '33,453 crore from Government of India. An amount of '44,896 crore (including grant of '28,198 crore) has been sanctioned by the Ministry of Power for DDUGJYÂ in 33 States and Union Territories, against which '30,664 crore (including grant of '22,299 crore) has been released tillÂ March 31,2021.

Erstwhile RE projects, subsumed under DDUGJY

Ministry of Power, Government of India has sanctioned an amount of '66,353.60 crore (including DDG projects) (grant involved: '59,718.24 crore) under erstwhile RE Projects (i.e., X^thÂ Plan, XI^thÂ Plan & XII^thÂ Plan) subsumed under DDUGJY inÂ 29 States including Union Territories, against which '57,738.96 crore (including grant of '52,072.70 crore) has been releasedÂ till March 31, 2021.

Additional infrastructure for enabling electrification of SAUBHAGYA households

Ministry of Power, Government of India has sanctioned additional fund of '14,178.86 crore (grant involved: '9,399 crore) for creation of additional infrastructure for SAUBHAGYA scheme under DDUGJY, against which '7,011.77 crore (including grantÂ of '6,468.12 crore) has been released till March 31, 2021.

6.4 Â Â Â Prime Minister Development Package for Jammu & Kashmir 2015

The Prime Minister Development Package (âPMDP-2015â) for the erstwhile Jammu & Kashmir State (now J&K and Ladakh Union Territories) was announced by the Hon'ble Prime Minister on November 27, 2015, with approved project cost ofÂ '2,570.14 crore (90% grant from Government of India i.e., '2,301.62 crore) for distribution strengthening works in rural and

urban areas. The major works covered under the scheme are system strengthening, connecting unconnected households, replacing of barbed wire and worn-out poles, underground cables at tourist places, consumer metering, construction of 33/11 kVÂ sub-stations at industrial areas and electrical infrastructure at religious shrines.

Out of the above, '1,157.76 crore (Government of India's grant: '1,041.98 crore) has been sanctioned for distribution strengthening works in rural areas. The fund shall be channelized through REC. Under the scheme, an amount ofÂ '612.35 crore has been released till March 31, 2021.

6.5 Â Â Â SAUBHAGYA - Pradhan Mantri Sahaj Bijli Har Ghar Yojana

The Hon'ble Prime Minister had launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) on September 25, 2017, to achieve universal household electrification in every village and district of the country. The scheme outlay is '16,320 crore,Â including gross budgetary support of '12,320 crore. REC is the nodal agency for operationalization of the scheme. UniversalÂ household electrification requires creation of electricity access through last mile connectivity. Wherever grid connectivity isÂ technically not feasible and financially unviable, electrification is resorted through solar-based off-grid systems.

The SAUBHAGYA scheme aims at providing:

a. Â Â Â Last mile connectivity and electricity connection to all un-electrified households in rural areas;

b. Â Â Â Last mile connectivity and electricity connection to all remaining economically poor un-electrified households in urbanÂ areas. Non-poor urban households are excluded from this scheme;

c. Â Â Â Solar Photovoltaic (SPV) based standalone system for un-electrified households located in remote and inaccessibleÂ villages/habitations, where grid extension is not feasible or cost effective.

Under the scheme, '14,109 crore (including grant of '9,093 crore) has been sanctioned by the Ministry of Power to 26 States or Union Territories, against which '8,736.90 crore (including Government of India's grant of '5,393.59 crore) has beenÂ released till March 31, 2021. It is noteworthy that 2.82 crore households have been electrified under SAUBHAGYA, DDUGJYÂ and State Government schemes till March 31, 2021.

6.6 Â Â Â Urja Mitra

Urja Mitra is a distribution sector initiative and a first of its kind application being implemented by your Company's wholly owned subsidiary,Â viz.,Â REC Power Development and Consultancy Limited (formerly known as REC Power Distribution CompanyÂ Limited) (âRECPDCLâ), under the guidance of Ministry of Power. Urja Mitra was earlier handled by REC Transmission ProjectsÂ Company Limited, another wholly owned subsidiary of REC, which got amalgamated into RECPDCL during the financial yearÂ 2020-21.

Urja Mitra provides a Central Outage Management and Notification Platform for State power distribution utilities, to disseminate power outage information to urban and rural power consumers across India through SMS, email or push notification. PowerÂ consumers across the nation get outage update through integrated mobile application for Android and iOS platforms. It alsoÂ provides a platform to view real time power outages in any part of the country and lodge complaints on power outages. As onÂ June 2021, data of around 23.32 crore consumers of 53 discoms in 29 States is uploaded into the application and 391.62 croreÂ SMSes have been sent to the consumers.

6.7 Â Â Â 11 kV Rural Feeder Monitoring Scheme

11 kV Rural Feeder Monitoring Scheme is being implemented by your Company's wholly owned subsidiary,Â viz.Â RECPDCL. The sole objective of the scheme is to monitor quality and quantity parameter of rural power supply across the country. UnderÂ the scheme, installed Modems/DCUs acquire the data from feeder meter which is being sent regularly to Meter Data AcquisitionÂ System (MDAS). Transfer of acquired data is being done through machine-to-machine communication without any humanÂ intervention. Analysis of such acquired data is being done on Meter Data Management system i.e., MDM, where various usefulÂ MIS pertaining to supply hours in rural and agriculture feeders / areas are being prepared. MDM is also integrated with NationalÂ Power Portal (NPP) which is being accessed by various stakeholders such as discoms, Central Electricity Authority (CEA),Â REC and RECPDCL.

6.8 Â Â Â Tarang

Tarang (Transmission App for Real-Time Monitoring and Growth) is a transmission sector initiative, being run under the guidance of the Ministry of Power through your Company's wholly owned subsidiaryÂ viz.Â RECPDCL. Tarang App providesÂ an informative medium regarding Pan-India progress of the transmission system, which can be drilled down for analysis toÂ month-wise, agency-wise, state-wise information etc. The reason for delay in case of stalled or delayed projects is separatelyÂ provided, so that all concerned stakeholders can take timely corrective decisions for project completion.

Tarang monitors the progress of both inter-state and intra-state transmission projects being implemented through Tariff Based Competitive Bidding (TBCB) as well as regulated tariff mechanism. Tarang also provides advance information of upcoming

transmission projects recommended by the National Committee on Transmission, aiding bidders to gear up for future transmission projects. In other words, it is a real time repository of transmission system across the country.

7. FINANCING ACTIVITIES

Your Company has been providing funding assistance for power generation (including conventional and renewable energy), transmission and distribution projects, including for the electrification of villages. During the financial year 2020-21, yourÂ Company also financed power utilities under the liquidity infusion scheme of the Government of India, envisaged as part ofÂ Atmanirbhar Bharat.

Details of major financing activities during the year under review were as under:

7.1 Generation

During the financial year 2020-21, your Company sanctioned 23 nos. of Generation, R&M (Renovation & Modernization) and other loans, including 2 nos. of additional loans with total loan assistance of '39,613.53 crore, including consortium financingÂ with other financial institutions, as per details given below:-

Particulars	No. of Loans	Loan amount (' in crore)
State Sector	22	38,682.78
- Fresh Loan(s)	20	34,392.24
- Additional Loan(s)	2	4,290.54
Private Sector	1	930.75
- Fresh Loan	1	930.75
Total	23	39,613.53

During the financial year 2020-21, your Company sanctioned 40 nos. of Renewable Energy projects with installed generation capacity aggregating to 3,759 MW, with total loan assistance of '17,171.34 crore, as per details given below:-

Particulars	No. of Loans	Loan amount (' in crore)
State Sector	15	2,309.78
- Fresh Loan(s)	15	2,309.78
Private Sector	25	14,861.56
- Fresh Loan(s)	16	12,912.77
- Takeout financing	9	1,948.79
T otal	40	17,171.34

The above loans included 20 solar photo-voltaic projects with aggregate capacity of 2,902 MW, 4 wind energy projects with aggregate capacity of 706 MW, 1 solar wind hybrid project of 150 MW capacity, 1 solar module and cell manufacturing projectÂ of 2000 MWp per annum capacity, 3 solarization projects under KUSUM scheme, 1 small hydro project of 1 MW, 6 projects forÂ repair and maintenance of hydel plants and 4 E-vehicle projects for procurement of total 902 E-buses.

In addition to above, moratorium was extended on outstanding dues of '1,040.60 crore of renewable energy loans during the year under review, pursuant to Board approved moratorium policy. These are also counted in the sanctions.

7.3 Transmission & Distribution

During the financial year 2020-21, your Company sanctioned Transmission & Distribution (T&D) schemes and projects involving a total loan assistance of '19,492.75 crore, including loan towards inter-state/intra-state transmission projects in private sector.Â The loans under T&D category included loans towards primary power evacuation schemes associated with generating plants,Â system improvement schemes, schemes for procurement and installation of equipment/material like meters, transformers,Â conductors, tower material, cables etc. Further, it also included loan component under Government-approved schemesÂ like DDUGJY, IPDS and SAUBHAGYA and infrastructure schemes for providing electricity access to various categories ofÂ consumers, including agricultural consumers.

Further your Company also sanctioned loans of '60,191.36 crore under the liquidity infusion scheme of the Government of India envisaged underÂ Atmanirbhar Bharat.Â Details of T&D loans sanctioned during the financial year 2020-21 are given below:-

Particulars	No. of Loans	Loan amount (' in crore)
State Sector	364	76,626.10
- Transmission Loan(s)	96	5,184.73
- Distribution Loan(s)	242	11,250.01
- Loans under Liquidity Infusion Scheme	26	60,191.36
Private Sector	3	3,058.01
- Intra-state Transmission Project	1	1,477.96
- Inter-state Transmission Project(s)	2	1,580.05
T otal	367	79,684.11

In addition to above, moratorium was extended on outstanding dues of '7,333.58 crore of T&D loans during the year under review, pursuant to Board approved moratorium policy. These are also counted in the sanctions.

7.4 Â Â Â Short / Medium Term Loans and other loan assistance

Your Company has also sanctioned 11 nos. of short-term, medium-term and other loans aggregating to '4,750.00 crore to various power utilities during the financial year 2020-21, towards their funds requirement for short-term, medium-term or forÂ working capital requirements etc. In addition to above, moratorium was extended on outstanding dues of '539.91 crore of otherÂ loans during the year under review, pursuant to Board approved moratorium policy. These are also counted in the sanctions.

7.5 Â Â Â Financing activities in North Eastern States

During the financial year 2020-21, your Company sanctioned total sum of '1,057.52 crore towards T&D and renewable energy projects in North Eastern States. This included loans under liquidity infusion scheme of '728.60 crore to the utilities in ManipurÂ and Meghalaya.

7.6 Â Â Â Appraisal system for financing private sector projects

REC has its own guidelines for appraisal of private sector projects. The promoter/entity appraisal is carried out on the basis of the financial performance, credit-worthiness, management proficiency and sectoral experience of the promoter entities. TheÂ project appraisal is carried out on the basis of various technical parameters like statutory clearances, PPA, infrastructure etc.Â Thus, 'Integrated Rating' of the project is arrived at, on the basis of combined ratings of entity and project. REC's interest ratesÂ and security structure are linked to the grades or integrated ratings assigned to private sector projects. During the financialÂ year 2020-21, REC has completed the process of limited review of the existing appraisal guidelines for private sector projects,Â in view of the changing market practices, regulatory environment, RBI policies etc.

7.7 Â Â Â Grading of state power utilities, JVs, companies, entities etc.

Your Company has well defined policy and guidelines for grading of State power utilities. The grading of stateÂ power utilities (generation, transmission and tradingÂ etc.) is carried out twice during a year, based on theÂ evaluation of the utilityâs performance against specificÂ parameters, operational and financial performance,Â regulatory compliances, annual financial resultsÂ etc. With regard to State power distribution utilitiesÂ (including SEBs / utilities with integrated operations),Â your Company adopts the final annual integratedÂ ratings carried out by independent rating agenciesÂ (CARE/ICRA), after approval of framework and ratingÂ by the Ministry of Power, Government of India.

For the purpose of funding, your Company has classified State power generation, transmissionÂ and trading utilities etc. into âA++â, âA+â, âAâ, âBâ & âCâÂ categories. During the financial year 2020-21, yourÂ Company has completed grading in respect of 141Â utilities (excluding State Government), out of which 19Â utilities were graded as A++, 48 as A+, 42 as A, 25 asÂ B and 7 utilities as C category. Your Company has alsoÂ developed a model for State grading on ERP platform.

RBI vide its circular dated November 4, 2019, has prescribed to maintain sufficient High Quality Liquid Assets (HQLAs) effective from December 1, 2020, in order to promote resilience of NBFCs to potential liquidity disruptions and to survive any acuteÂ liquidity stress scenario. In compliance of the same, during the year under review, the Company has invested in GovernmentÂ Securities, State Development Loans and Corporate Bonds.

Pursuant to the terms of perpetual bonds of Indian Bank, Bank of Baroda (erstwhile Vijaya Bank) and Canara Bank (erstwhile Syndicate Bank) subscribed to by the Company, the said banks have exercised call option during the financial year 2020-21Â and these bonds have been redeemed on March 30, 2021, upon completion of 5 years from the date of allotment.

The Company sold 1,22,71,211 equity shares of Indian Energy Exchange Limited in the open market through retail trading. The price of the share was prevailing multiple times of its purchase price and the Company has recorded net gain of '248.69 crore.Â Subsequent to the de-recognition of the investments on account of actual sale of the equity shares, the Company has transferredÂ the cumulative gain or loss on such shares within equity during the period.

The Company has also been allotted various securities of its borrower companies or their promoters, pursuant to implementation of restructuring plan or under IBC. Details of investments are appearing in Note no. 10 of Notes to Accounts of the standaloneÂ financial statements.

8. Â Â Â INTERNATIONAL COOPERATION & DEVELOPMENT

REC has four lines of ODA (Official Development Assistance) credit with KfW, Germany, three of them have been fully drawn as on March 31, 2021. KfW-I and KfW-II ODA loans are of EUR 70 million each (approx. '454.02 crore and '480.97 croreÂ respectively) and KfW-III is of EUR 100 million (approx. '753.73 crore). In fiscal 2019, REC had entered into a fourth loanÂ agreement with KfW for financial assistance of USD 228 million. As on March 31,2021, total amount of USD 168.85 million hasÂ been drawn under this facility.

Apart from the above, REC has two lines 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. '820.12 crore) and JPY 11,809.48 millionÂ (approx. '640.64 crore) respectively have been drawn as on March 31, 2021.

9. Â Â Â PERFORMANCE & ACHIEVEMENTS OF GOVERNMENT PROGRAMMES DURING FINANCIAL YEAR 2020-21

9.1 Â Â Â Performance and achievement under 3 schemes of Government of India i.e., DDUGJY, PMDP-2015 for J&K andÂ SAUBHAGYA, during financial year 2020-21.

a. Â Â Â Sanction: During the financial year 2020-21, an amount of '480 crore has been sanctioned under DDUGJY to UnionÂ Territories of Jammu & Kashmir and Ladakh.

b. Â Â Â Fund release:Â The subsidy of Government of India is channelized through REC and the matching contribution is infusedÂ by the respective State Government or implementing agencies, through loan at their own. Government of India subsidy ofÂ '4,940.62 crore has been released to States during the financial year 2020-21.

c. Â Â Â Physical Progress of creation of infrastructure:Â During the financial year 2020-21, the following works have beenÂ completed under the 3 schemes of Government of India i.e., DDUGJY, PMDP-2015 for J&K and SAUBHAGYA:

(i) Â Â Â Metering of distribution transformers (nos.): 61,994 nos.

(ii) Â Â Â Feeder separation (including 11 kV lines) cKm: 30,668 cKm

(iii) Â Â Â Metering of 11 kV feeders (nos.): 1,360 nos.

(iv) Â Â Â Commissioning of sub-stations (including augmentation) (nos.): 570 nos.

In addition, 2,385 ckm 33 kV lines were installed, 54,964 cKm of LT lines were installed, 66,017 nos. of distribution transformers were commissioned and 15,20,550 nos. of consumer meters were installed.

d. Â Â Â Progress of electrification of households:Â During the financial year 2020-21, electrification of 4.93 lakh householdsÂ was achieved under SAUBHAGYA.

9.2 Â Â Â Cumulative Performance upto March 31, 2021

a. Sanction and release:Â An amount of '1,40,695 crore has been sanctioned and Government of India grant of '86,845.65 crore has been disbursed to the implementing agencies cumulatively up to March 31, 2021, under theÂ 3 schemes of Government of IndiaÂ viz.Â DDUGJY, PMDP-2015 for J&K and SAUBHAGYA.

b. Â Â Â Physical progress of creation of infrastructure: The following works have been completed cumulatively upto March 31,Â 2021 under the above-mentioned Government programmes since inception:

i) Â Â Â Metering of distribution transformers (nos.): 2,34,193 nos.

ii) Â Â Â Feeder separation (including 11 kV lines) cKm: 7,88,978 cKm

iii) Â Â Â Metering of 11 kV feeders: 14,021 nos.

iv) Â Â Â Commissioning of sub-stations (including augmentation) (nos.): 7,098 nos.

In addition, 37,415 ckm 33 kV lines were installed, 12,99,767 cKm of LT lines were installed, 16,24,170 nos. of distribution transformers were commissioned and 1,54,54,967 nos. of consumer meters were installed.

c. Â Â Â Progress of electrification of households:Â With the efforts of States and project implementing agencies, electricityÂ connections were provided to 2.63 crore households under SAUBHAGYA, DDUGJY and State Government schemesÂ during the period from October 11, 2017 to March 31, 2019.

Further, on the request of 7 States (Assam, Chhattisgarh, Jharkhand, Karnataka, Manipur, Rajasthan and Uttar Pradesh), the Ministry of Power accorded time extension approval to electrify additional 19.09 lakh un-electrified households, which wereÂ unwilling earlier to get electrified and had expressed their willingness before March 2019. In respect of the same, 18.85 lakhÂ households have been electrified, out of which 4.93 lakh households were electrified during financial year 2020-21.

10. Â Â Â STANDARDIZATION, QUALITY CONTROL & MONITORING

Your Company has regularly 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. TheÂ Company, in order to promote new technologies, has been continuously supporting innovations using latest R&D in the field ofÂ power distribution.

In line with the Quality Control Mechanism of Government programmes, REC Quality Monitors (RQM) have been appointed for carrying out field and material inspections for ensuring proper quality of materials and works during implementation of suchÂ schemes. During the financial year 2020-21, RQMs have undertaken field inspection of 21,547 villages, substations & feedersÂ and material inspection of 358 nos. at manufacturer premises, for ensuring quality of works.

REC has developed an online quality portal for digitization of quality inspections of National and REC Quality Monitors. REC has also developed mobile app âSAKSHYAâ, for uploading observations of RQM agencies and compliances by discoms andÂ programme implementing agencies.

11. Â Â Â RISK MANAGEMENT

The Company has a Comprehensive Risk Management Policy, which covers Credit Risk, Operational Risk, Liquidity Risk and Market Risk.

11.1 Risk Management Committee

The Company is having a Risk Management Committee (RMC) of its Directors in place, for monitoring the integrated risks of the Company. The main function of the RMC is to monitor various risks and also to suggest action for mitigation of risks arisingÂ in the operation and other related matters of the Company. Further, as required under RBI norms, the Company has appointedÂ a Chief Risk Officer (CRO).

The Company has identified its various risks and has taken appropriate steps to mitigate them. Brief description of the risks is given below:-

(i) Â Â Â Cred]t_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 theÂ same, the Company follows systematic institutional and project appraisal process to assess the credit risk. These processesÂ include a detailed appraisal methodology, identification of risks and suitable structuring and credit risk mitigation measures.Â Further, on regular basis REC loan book is categorized as high, moderate or low, depending upon the asset classificationÂ based on the ECL methodology.

(ii) Â Â Â ^Onaraiiona!âRisk

Operational risk arises from inadequate or failed internal processes, people and systems or external events. The Company has implemented a comprehensive Risk Register through which all the operational risks are measured and categorised asÂ high, moderate or low. Further, the operational risks of the Company are studied in all functional areas such as Business,Â Compliance, Finance, Human Resource, Cyber Security, Legal, Operational and Strategic.

(in) Liquidity-Risk

Liquidity risk primarily arises due to the maturity mismatch associated with assets and liabilities of the Company. Liquidity risk involves the inability of the Company to fund increase in assets, manage unplanned changes in funding sources and to meetÂ obligations when required.

(iv) Market_Risk

Market risk of the Company is defined as the risk to Company's earnings and capital due to changes in the market dynamics such as interest rate or prices of securities, foreign exchange fluctuations.

11.2 ALCO Committee

To manage the market risk, the Company has constituted an Asset Liability Management Committee (ALCO) under the chairmanship of CMD, which comprises of Director (Finance), Director (Technical), Executive Directors and Chief GeneralÂ Managers from Finance and Operating Divisions as its members.

ALCO monitors risks related to interest rates, liquidity and currency rates. Brief description of the risks is given below:

(i)Â Â Â Â Interest Rate Risk:Â Interest rate risk is the potential loss arising from fluctuations in market interest rates. In order toÂ mitigate the interest rate risk, your Company periodically reviews its lending rates and the weighted average cost ofÂ borrowing based on prevailing market rates.

(ii) Â Â Â Liquidity Risk:Â Liquidity risk is the risk of potential inability to meet liabilities as they become due. The Company facesÂ liquidity risks, which could require it to raise funds or liquidate assets on unfavourable terms. The Company managesÂ liquidity risk through a mix of strategies, including forward-looking resource mobilization based on projected disbursementsÂ and maturing obligations.

Your Company has been able to mitigate negative impact on its liquidity position due to outbreak of Covid-19 pandemic and consequent scheme of moratorium of loans by RBI till August 31,2020, through its strong market credibility and reachÂ in the market in arranging funds through various sources of borrowings i.e., institutional bonds, ECBs and bank loans etc.

(iii) Â Â Â Foreign Currency Risk:Â Foreign currency exchange risk involves exchange rate movements among currencies thatÂ may adversely impact the value of foreign currency-denominated assets, liabilities and off-balance sheet arrangements.Â The Company manages foreign currency risk associated with exchange rate and interest rate through various derivativeÂ instruments.

12. Â Â Â PREFERRED CUSTOMER POLICY

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

13. Â Â Â INFORMATION TECHNOLOGY INITIATIVES

Your Company has taken several initiatives on the Information Technology front. It has revamped its e-Business ERP to the latest version and migrated ERP hardware to private cloud environment at REC Datacenter. The new ERP supports GSTÂ and latest accounting standards (Ind-AS) and has advanced features to facilitate further automation of business processes.Â The Company also has E-office system with automated workflow and electronic document management features, which hasÂ improved the efficiency and transparency of operations and also created lesser need for use of paper.

The Company has completely revamped its organization wide MPLS VPN network infrastructure facility with latest network and security devices, enhanced bandwidth and high availability features. A secured VPN network has facilitated users to connectÂ to REC network from remote locations to access critical applications for seamless operations. The VC systems of REC haveÂ been revamped to facilitate arranging of meetings / discussions across all offices of the Company. The VC facility is also usedÂ for meetings with MoP and other Ministries of the Government of India; and for Board and Committee meetings of the CompanyÂ and its subsidiaries.

The Primary Data Centre (PDC) and Disaster Recovery Centre (DRC) of REC are ISO/IEC 27001:2013 certified and also comply with National Cyber Security Policy of Government of India. REC has also implemented Data Leakage & PreventionÂ (DLP) system at DC and DRC for preventing sharing of confidential and critical information outside the corporate network. RECÂ has also implemented IT security directives of RBI's Master Direction of IT Framework for NBFCs.

REC has deployed a number of in-house developed systems as part of IT initiatives towards achieving better E-governance. Towards green initiative and paperless environment, centralized scanning solution has been implemented in the Company'sÂ Corporate Office. REC also facilitates and promotes the IT initiatives of the Government of India within the Company, likeÂ MyGov, e-Governance, DPE guidelines on digital mode of payments etc.

14.Â REC INSTITUTE OF POWER MANAGEMENT AND TRAININGÂ (RECIPMT).

REC Institute of Power Management and Training (RECIPMT) is a premier power sector training institute established in 1979 under the aegis of REC Limited at Hyderabad, Telangana, to cater to the training and development needs of engineers andÂ managers of power sector organizations. During the last four decades, RECIPMT has organized 2,573 training programmesÂ and trained 56,113 engineers/managers from power utilities, like generation, transmission & distribution companies, electricityÂ departments, rural electric cooperatives, electricity regulatory commissions etc.

RECIPMT is also a partner training institute with Ministry of External Affairs (MEA), Government of India for organizing training programmes for the executives of international power sector organizations. Uptil now, RECIPMT has organized 102 suchÂ training programmes and trained 1,683 executives from 98 countries. The duration of such training programmes varies fromÂ 4 to 12 weeks.

14.1 Â Â Â National Training Program (NTP) sponsored by MoP, GoI under DDUGJY

RECIPMT is the nodal agency for coordination and implementation of National Training Program for C&D category employees of power distribution companies under DDUGJY sponsored by MoP. In spite of ongoing Covid-19 pandemic all over India,Â RECIPMT has successfully signed 34 Memorandum of Agreements with discoms and their training institutes and completedÂ training for 25,869 participants, in a total of 1,128 training batches across the country during the financial year 2020-21. It isÂ pertinent to mention that 1,035 training batches were organized by discoms, whereas 93 training batches were organized byÂ RECIPMT support on the request of discoms.

14.2 Â Â Â REC Sponsored Programmes

In order to encourage training activities and bring in awareness among the executives of power utilities during the Covid-19 pandemic situation, the following online training programmes were conducted free of cost by RECIPMT during the financialÂ year 2020-21, with all India participation:

a. Â Â Â REC sponsored 3-day Training Programmes on Electrical Safety

Safety being the major concern of power utilities in the country, REC sponsored 50 training programmes on âElectrical Safetyâ. Under the same, RECIPMT trained a total of 1,271 participants from different utilities during the financial yearÂ 2020-21. The participation in the programmes was from MSEDCL, ApCPDCL, MPPaKVVCL, PSPCL, MSPGCL, SikkimÂ PDD, CESS Sircilla, KSEBL, BSPTCL, GETRI, OPTCL, TSECL, HPTI and GRIDCO engineers.

b. Â Â Â REC sponsored 1-Day Webinars on Sustainability of Power Utilities

RECIPMT organized 60 batches of 1-day webinars on âSustainability of Power Utilitiesâ covering subjects such as Electricity Act amendments, tariff reforms, real time markets and renewable integration. Under the same, RECIPMTÂ trained 1,238 participants of power sector companies i.e., from gencos, transcos and discoms.

Major utilities which participated were JKPDD, HPPCL, PTCUL, MeECL, MSEDCL, NLCIL, TSSPDCL, MPPoKVVCL, PSPCL, MSPGCL, Sikkim PDD, CESS Sircilla, KSEBL, BSPTCL, GETRI, OPTCL, TSECL, HPTI and GRIDCO.

c. Â Â Â REC sponsored awareness webinars

REC also conducted webinars on âSafety Aspects and Energy Management Systemâ, in which 44 power sector executives participated; and on âRoof Top Solar Systemsâ, in which 22 executives participated.

14.3 Â Â Â Open calendar programmes for power utilities

Due to Covid-19 pandemic situation, the trainings were announced in virtual or online mode in the form of webinars, as soon as the Government of India allowed training activities. In spite of Covid-19 severity, RECIPMT successfully organized 6 trainingÂ programmes as webinars on different topics such as solar power generation, disaster management, distribution transformers,Â labour laws, O&M of sub-stations and smart meters. A total of 103 participants took part in these webinars.

14.4 Â Â Â REC executives (in-house) training programmes

RECIPMT organized 4 in-house training programmes for executives of REC, on topics such as leadership and communication skills, loan documentation and Government e-Marketplace (GeM) portal. Under the same, 131 REC executives were trainedÂ during the year.

During the financial year 2020-21, RECIPMT conducted an aggregate of 1,250 training programmes, which were attended by 28,678 participants, with achievement of 82,420 training man-days in total. This included 1,128 National Training ProgrammesÂ attended by 25,869 participants, achieving 76,956 man-days of training, 112 REC-sponsored training programmes forÂ power utilities attended by 2,575 participants, achieving 5,099 man-days of training and 10 other training programmes withÂ 234 participants, achieving 365 man-days of training.

15. Â Â Â ISO 9001:2015 QUALITY ASSURANCE CERTIFICATION

The Company has implemented Quality Management Systems as per ISO 9001:2015 standards in six major divisions of Corporate Office and 18 Regional and State Offices across the country for processing of claims.

16. Â Â Â HUMAN RESOURCES MANAGEMENT

To infuse fresh professionals in the existing manpower pool of the Company, 9 executives were inducted in the Company during the financial year 2020-21, through campus recruitment. The total manpower of the Company as on March 31, 2021Â stood at 428 employees, which included 366 executives and 62 non-executives.

16.1 Reservation in Employment

The Directives issued by the Government of India regarding reservations for SC/ST/OBC etc. in appointment/promotion to various posts were complied with. The group wise details of SC, ST and OBC employees out of the total strength as on MarchÂ 31, 2021 were as under:

Group	Number of Employees
	T otal		SC		ST		OBC
	FY 2020-21	FY 2019-20	FY 2020-21	FY 2019-20	FY 2020-21	FY 2019-20	FY 2020-21	FY 2019-20
A	366	385	40	43	16	17	72	70
B	22	36	3	5	-	-	1	2
C	40	47	15	16	-	1	3	3
Total	428	468	58	64	16	18	76	75

16.2 Training & Human Resource Development

As a critical tool to up-grade skill sets of the employees as well as to ensure high levels of productivity, Training & Human Resource Development continued to receive priority during the financial year 2020-21. Due to the ongoing Covid-19 pandemic,Â employees were encouraged to take-up online training programmes. Various programmes on managing lifestyle during theÂ pandemic were organized. All possible opportunities and support were provided to employees to improve their performance andÂ productivity. Training was also provided to enhance and upgrade their professional knowledge, as also to sensitize employeesÂ about the socio-economic environment in which the Company operates. Further, trainings aimed at helping employees in theirÂ spiritual growth and attitudinal development, were also imparted.

In order to equip the employees professionally, 179 employees attended various training programmes and workshops. Together, these interventions enabled the Company to achieve 329 training man-days. Due to the Covid-19 pandemic, no executive wasÂ deputed for a foreign training.

16.3 Employee Welfare

To provide improved health care facilities to the employees and their dependent family members, services of part-time doctorsÂ were engaged for providing on-site medical consultation. TheÂ Company has also been funding sports and recreation events, asÂ well as equipment for use by employees for their well-being.

Sports Activities

During the financial year 2020-21, REC hosted an Inter-CPSU Carrom Tournament at Dehradun and also sponsored participationÂ of its employees in various inter-CPSU sports tournaments in tableÂ tennis, badminton, volley ball, chess etc., organized by powerÂ sector CPSUs under the aegis of Power Sports Control BoardÂ (PSCB). Employees were encouraged to participate in quizzes,Â paper presentations and simulation competitions conducted byÂ various organizations.

16.4 Â Â Â Representation of Women Employees

As on March 31, 2021, the Company had 70 permanent women employees, which represents 16.36% of the total work force. There is no discrimination of employees on the basis of gender. A Women's Cell has been in operation in the Company toÂ look after welfare and all-round development of the women employees. REC also celebrated International Women's Day onÂ March 8, 2021.

16.5 Â Â Â Industrial Relations

The Industrial Relations scenario in the Company continued to be cordial and harmonious in the financial year 2020-21. There was no loss of man-days on account of industrial unrest. Regular interactions were held with REC Employees Union andÂ REC Officers Association on issues of employee welfare. This has helped in building an atmosphere of trust and cooperation,Â resulting in a motivated workforce and continued improvement in the business performance.

16.6 Â Â Â Grievance Redressal

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

Further, your Company also has a Public Grievance Redressal system in place, for dealing with the grievances of the public at large. The Company has appointed a senior official as the Chairman, Public Grievance in this regard, to ensure promptÂ redressal of grievances within the stipulated time frame.

17. CORPORATE SOCIAL RESPONSIBILITY & SUSTAINABLE DEVELOPMENT

REC's Corporate Social Responsibility and Sustainable Development (CSR & SD) initiatives are aimed to fund and support socially beneficial projects as a guiding principle, giving priority to issues of foremost concern in the national development agendaÂ and to reach a wide spectrum of beneficiaries, with a view to empower economically and socially backward communities. CSRÂ initiatives have been carried out by REC in the fields of sanitation and hygiene facilities, promotion of healthcare facilities, skillÂ development, women empowerment, environmental sustainability and rural infrastructural development, in order to facilitateÂ inclusive social development.

The Company's âCorporate Social Responsibility & Sustainability Policy' is aligned with the provisions of the Companies Act, 2013 and rules made thereunder. The Company undertakes its CSR activities through âREC Foundation', a society registeredÂ under the Societies Registration Act, 1860.

For the financial year 2020-21, the Board approved a CSR budget of '144.32 crore, in line with the applicable provisions of the Companies Act, 2013 and Rules made thereunder. Against the same, the Company spent a total amount of '147.77 crore duringÂ the year towards various CSR projects. This included a contribution of '50 crore towards the PM CARES Fund, '6.93 croreÂ towards providing food, ration, sanitizers, masks, PPE kits etc. to migrant workers, healthcare workers and poor persons andÂ '0.72 crore towards providing cold chain equipment to store Covid-19 vaccines in West Bengal, Nagaland and Dadra & NagarÂ Haveli.

DPE has issued guidelines to CPSEs to spend 60% of CSR budget on thematic areas of health & nutrition for the year 2020-21, preferably in aspirational districts. The Company increased its efforts in a big way to support welfare work in the aboveÂ thematic areas, across different aspirational districts. The Company is committed to CSR projects aimed at improving healthÂ services and reducing malnutrition in Gajapati (Odisha), Mamit (Mizoram), Kiphire (Nagaland), Muzaffarpur (Bihar), UdhamÂ Singh Nagar (Uttarakhand), Chandel (Manipur) and West Sikkim (Sikkim) districts.

The detailed Annual Report on CSR activities for the financial year 2020-21, including particulars of impact assessment(s) carried out in respect of various CSR projects, is forming part of this Annual Report. Further, the CSR & Sustainability Policy ofÂ the Company is available atÂ https://www.recindia.nic.in/our-csr-initiatives.

18. VIGILANCE ACTIVITIES

REC constantly endeavors to optimize probity and integrity among employees and to promote transparency, fairness and accountability in all operational areas. REC's Vigilance division mainly aims at âPreventive Vigilance' by reviewing the policies,Â rotation and transfers of employees holding sensitive posts, review of audit reports, review of projects, tenders and contractsÂ awarded, inspections of regional offices, review of Annual Property Returns (APRs), etc.

In this regard, the following major activities have been carried out:

â¢ Â Â Â In compliance with the instructions of CVC/MoP, the matter of rotational transfers from the identified sensitive posts isÂ constantly being pursued.

â¢ Â Â Â Sending prescribed periodical statistical returns to CVC and MoP on time.

â¢ Â Â Â Regular review of audit reports i.e. Internal, Statutory and C&AG Audit Reports.

â¢ Â Â Â Review of projects, tenders and contracts awarded. Wherever deviations were observed, the matter was taken up with theÂ concerned divisions, which led to strengthening of appraisal system and guidelines.

â¢ Â Â Â Field inspections of regional offices and scrutiny of APRs.

â¢ Â Â Â Review of selection process of legal consultant and lender's legal counsel.

â¢ Â Â Â Review of one case of resource mobilization.

â¢ Â Â Â Field inspections of REC financed projects.

â¢ Â Â Â Thrust on leveraging of technology was continued, with the result that information relating to loans, schemes, tenders,Â third party bills etc. are online.

â¢ Â Â Â Vigilance Monitoring System has been developed for timely detection and reducing the occurrence of lapses, whichÂ covers various functionalities of the organization, like procurement & contracts, bill tracking, loans, assets and employeeÂ payments (medical and travel).

â¢ Â Â Â It was ensured that information and policies like tenders, requisite forms, status of loan applications and third-partyÂ payments, Fair Practices Code, Prevention of Fraud Policy, CSR Guidelines, Whistle Blower Policy etc. are available onÂ REC's website.

As per the instructions of Ministry of Power, almost all tenders above '2 lakh were processed through E-procurement mode. E-reverse auction is also in process, in cases where estimated value of procurement and quoted prices exceed certain parameters.

As on March 31, 2021, no disciplinary case was pending in REC.

Observance of Vigilance Awareness Week

REC observed Vigilance Awareness Week from October 27, 2020 to November 2, 2020. During this week, REC administered Integrity Pledge and conducted competitions like mask designing with slogan writing, online quiz, essay writing, poem recitationÂ and painting for its employees and their family members. REC also organized a half-day workshop/webinar on âContractsÂ Managementâ for its employees on October 28, 2020. Apart from this, vigilance awareness activities were also organized atÂ various regional offices and subsidiaries of REC.

Further, Action Taken Report on the activities undertaken at REC during the observance of Vigilance Awareness Week, 2020 was sent to CVC in the prescribed format.

Moreover, REC continued its endeavor to groom young school children into vigilant citizens through âIntegrity Clubsâ, that are now present in 32 schools across India, covering 1600+ students.

19. IMPLEMENTATION OF OFFICIAL LANGUAGE

In order to promote the use of Hindi in official work, continuous efforts are made by the Company, in terms of the AnnualÂ Programme issued by the Department of Official Language,Â Ministry of Home Affairs, Government of India.

To encourage the use of Hindi amongst employees of the Company, 'Hindi Month' was organized at Corporate OfficeÂ during September 1, 2020 to September 30, 2020, whereinÂ various competitions likeÂ Hindi Kavita Lekhan, Hindi Yatra-Vrittant Lekhan, Hindi Nibandh Lekhan, General KnowledgeÂ Quiz, Hindi Cinema Quiz, Sports QuizÂ were organized. TheÂ participation of employees in all such events and competitionsÂ was encouraging. Prizes were awarded to winners in differentÂ categories, to motivate the employees to increase the useÂ of Hindi in their day-to-day work. 'Hindi Fortnight' was alsoÂ organized in various regional offices and State offices of theÂ Company, including at RECIPMT, to provide hands-on exposureÂ to participants in discharge of their official work in Hindi.

The Committee of Parliament on Official Language successfully conducted inspection of New Delhi, Mumbai and Bhubaneswar offices of REC on October 3, 2020, January 6, 2021 and January 11, 2021 respectively. These inspections have inculcated aÂ spirit of awareness among the employees for enhanced adoption of Hindi in their work.

AÂ Rajbhasha GoshthiÂ was organized on January 21, 2021 at New Delhi, where Secretary (Official Language) motivated the senior officials of the Company through his addressÂ 'Rajbhasha Hindi ke Prabhavi Karyanwayan mein Barah Pra ki BhumikaâÂ and also reviewed the use of Hindi in official work of the Company.

An online training workshop onÂ KanthasthÂ (translation memory) was organized on March 1, 2021. An inter-PSUÂ Hindi Ashu BhashanÂ competition was also organized on March 12, 2021 by regional office Jaipur, under the aegis of its TOLICÂ (PSUs) at Jaipur. Your Company has been publishing Hindi journalÂ âUrjayanâÂ containing interesting and useful articles, as wellÂ as literary writings of the employees. In order to motivate write ups, articles, poems etc. in Hindi for the journal, the CompanyÂ has adopted a policy to award prizes and incentives.

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

20.1 Conservation of Energy

Your Company does not own any manufacturing facility, hence there are no significant particulars relating to conservation of energy and technology absorption.

The registered office of the Company is located in SCOPE Complex at New Delhi, where all civil, electrical installation and maintenance is carried out by SCOPE (Standing Conference of Public Enterprises). During the financial year 2020-21,Â SCOPE has saved around 15.48 lakh units of energy, by effective monitoring, controlling and scheduling the operation of ACÂ chilling units and elevators, use of other energy efficient equipment such as 100kW and 10kW solar power plant at terraceÂ and by use of movement/occupancy sensor as well as maintaining power factor nearest to unity. This resulted in financialÂ saving of around '1.89 crore.

REC has recently started functioning from its new office building at Gurugram, Haryana, which houses the Corporate Office. The building is conceived to be a GRIHA-5 Star rated Net Zero building with unique features. In order to make the buildingÂ Net Zero, a 964kWp solar plant has been installed at the rooftop, supported by solar pergola structure, to cater to the loadÂ requirement. Further, highly efficient solar panels (efficiency >21%) have been installed to produce 16.7 lakh units of electricityÂ in the first year. In order to conserve energy, the building is designed and constructed by using energy efficient fagade andÂ radiant cooling slabs, to lower about 30% building HVAC load requirement.

20.2 Foreign Exchange Earnings & Outgo

During the financial year 2020-21, the Company had no foreign exchange earnings. Further, foreign exchange outflow aggregating to '12,158.78 crore was made during the year, on account of interest, principal repayment, finance charges andÂ other expenses.

21. SUBSIDIARY COMPANIES

During the financial year 2020-21, REC had two wholly owned subsidiariesÂ viz.,Â REC Power Distribution Company Limited (later renamed as REC Power Development and Consultancy Limited w.e.f. July 16, 2021) (âRECPDCLâ) [CINÂ U40101DL2007GOI165779] and REC Transmission Projects Company Limited (RECTPCL) [CIN: U40101DL2007GOI157558].Â Pursuant to a Scheme of Arrangement for Amalgamation of RECTPCL (transferor company) with RECPDCL (transfereeÂ company) under Section 230-232 of the Companies Act, 2013 approved by the Ministry of Corporate Affairs (MCA) vide OrderÂ dated February 5, 2021, RECTPCL has been amalgamated into RECPDCL with the Appointed Date of April 1, 2020. TheÂ amalgamation came into effect from February 6, 2021.

The amalgamation was aimed to merge the said two companies into one single entity, in order to achieve better synergies in operations, greater access to different market segments and to reap the benefits of higher capital base and pooled resources.Â Pursuant to the amalgamation, all assets & liabilities of RECTPCL stand transferred into RECPDCL. Further, pursuant to theÂ amalgamation, RECPDCL has allotted 35,500 fully paid equity shares of '10/- each to the Company, in lieu of 50,000 fully paidÂ equity shares of '10/- each held by REC in the erstwhile RECTPCL. Therefore, as on March 31, 2021, REC holds a total ofÂ 85,500 fully paid up equity shares of '10/- each in RECPDCL.

RECPDCL is engaged in the businesses of project implementation and consultancy services in power sectorÂ viz.Â implementation of distribution system strengthening works, implementation of grid/off-grid solar (PV) projects, installation of smart meters,Â preparation of detailed project reports, third party inspections, pre-dispatch material inspections and acting as project managementÂ consultant / project management agency under some projects of State-funded schemes such as DDUGJY, IPDS etc.

Further, pursuant to the amalgamation, RECPDCL also acts as âBid Process Coordinatorâ for selection of Transmission Service Providers through Tariff Based Competitive Bidding (TBCB) process, for independent inter-state and intra-state transmissionÂ projects assigned by the Ministry of Power and State Governments from time to time. In order to initiate development of eachÂ independent inter-state / intra-state transmission project, RECPDCL incorporates a project specific Special Purpose VehicleÂ (SPV) as its wholly owned subsidiary, which also becomes the subsidiary of REC. After selection of the successful bidder inÂ accordance with the TBCB Guidelines, such subsidiaries are transferred by RECPDCL to the successful bidder, along with allÂ assets and liabilities.

During the financial year 2020-21, RECPDCL transferred 1 project specific SPV namely Ramgarh New Transmission Limited [CIN: U40300DL2020GOI365214] to the selected bidder, i.e., Power Grid Corporation of India Limited. As on March 31,2021,Â RECPDCL had the following project specific SPVs for various inter-state / intra-state transmission projects:-

(1) Â Â Â Dinchang Transmission Limited* [CIN: U40300DL2015GOI288066]

(2) Â Â Â Chandil Transmission Limited [CIN: U40108DL2018G0I330905]

(3) Â Â Â Koderma Transmission Limited [CIN: U40300DL2018GOI331192]

(4) Â Â Â Dumka Transmission Limited [CIN: U40300DL2018G0I331490]

(5) Â Â Â Mandar Transmission Limited [CIN: U40101DL2018GOI331526]

(6) Â Â Â Kallam Transmission Limited [CIN: U40106DL2020G0I364104]

(7) Â Â Â Gadag Transmission Limited [CIN: U40100DL2020G0I364213]

(8) Â Â Â Fatehgarh Bhadla Transco Limited# [CIN: U40108DL2020GOI364227]

(9) Â Â Â Rajgarh Transmission Limited [CIN: U40106DL2020GOI364436]

(10) Â Â Â Bidar Transmission Limited [CIN: U40106DL2020GOI364498]

(11) Â Â Â Sikar New Transmission Limited# [CIN: U40106DL2020GOI364672]

(12) Â Â Â MP Power Transmission Package-I Limited [CIN: U40108DL2020GOI367417]

(13) Â Â Â MP Power Transmission Package-II Limited [CIN: U40100DL2020GOI368275]

* Â Â Â The said company has been dissolved and its name has been struck-off the register of companies w.e.f August 17, 2021

# Â Â Â Transferred to Power Grid Corporation of India Limited on June 4, 2021

During the financial year 2020-21, RECPDCL recorded an income of '184.69 crore, as compared to income of '222.18 crore in the previous financial year. The Profit After Tax for the financial year 2020-21 was '25.62 crore, as against '66.91 crore in theÂ previous financial year. Further, the Net Worth of RECPDCL as on March 31,2021 was '297.99 crore, as against Net Worth ofÂ '280.80 crore as on March 31, 2020.

22. Â Â Â DETAILS OF JOINT VENTURE AND ASSOCIATE COMPANY

REC, along with three other PSUs, namely Power Grid Corporation of India Limited, NTPC Limited and Power Finance Corporation Limited, has formed a Joint Venture Company i.e., Energy Efficiency Services Limited (EESL) [CIN: U40200DL2009PLC196789]Â on December 10, 2009. EESL is a super energy service company (ESCO) and acts as a resource center for capacity buildingÂ for state discoms, Energy Regulatory Commissions, State Development Authorities, upcoming ESCOs, financial institutionsÂ etc. REC has contributed '218.10 crore (22.18%) towards the paid-up equity share capital of EESL upto March 31, 2021.Â EESL is formed to create and sustain market access of energy efficient technologies particularly in the public facilities likeÂ municipalities, buildings, agriculture, industry etc. and to implement several schemes of Bureau of Energy Efficiency, MinistryÂ of Power, MNRE, Government of India. EESL is also leading the market-related activities of the National Mission for EnhancedÂ Energy Efficiency, one of the 8 national missions under National Action Plan on Climate Change (NAPCC).

Based on the provisional financial statements of EESL for the financial year 2020-21, its turnover for the year was '1,471.85 crore (on standalone basis). Further, the Profit Before Tax and Profit After Tax for the financial year 2020-21 were '43.96 crore andÂ '32.87 crore respectively.

23. Â Â Â CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129 of the Companies Act, 2013 and Rules made thereunder and Indian Accounting Standards, the Company has prepared the Consolidated Ind-AS Financial Statements for the financial year 2020-21, that include its whollyÂ owned subsidiary company i.e., RECPDCL (Audited) and joint venture company i.e., EESL (Un-audited), which shall also beÂ laid before the ensuing 52^ndÂ Annual General Meeting along with the Standalone Financial Statements of the Company.Â Pursuant to Section 129(3) of the Act, a statement containing the salient features of the financial statements of subsidiaries/Â associates and joint ventures in Form AOC-1, forms part of this Annual Report. The financial statements of Special PurposeÂ Vehicle (SPV) companies, which are wholly owned subsidiaries of RECPDCL, are not consolidated with the financial statementsÂ of REC, since the investment / interest in such companies is held for sale and therefore, interest in such SPV companies isÂ accounted for as per Ind-AS 105.

The Audited Ind-AS Financial Statements including the Consolidated Ind-AS Financial Statements and Audited Accounts of subsidiaries of the Company are available on the website of the Company i.e.,Â www.recindia.nic.in. Further, these documentsÂ would be kept open for inspection through electronic mode by any member or any trustee for debenture holders. The CompanyÂ would also make available copy thereof through e-mail upon specific request by any member of the Company.

24. Â Â Â DIRECTORS AND KEY MANAGERIAL PERSONNEL

Being a Government Company, the power to appoint 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 theÂ Company is fixed as per the extant Guidelines issued by Department of Public Enterprises (DPE), from time to time. The sittingÂ fee paid to Part-time Non-official Directors, Nominee Directors and Independent Directors for attending the meetings of BoardÂ and Committees thereof, are within the limits prescribed under the Companies Act, 2013. The Government Nominee DirectorÂ is not entitled to receive any remuneration or sitting fee from the Company, as per the norms of Government of India. Details ofÂ remuneration and sitting fees paid to Directors are appearing in the 'Report on Corporate Governance' annexed to this Report.

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 PersonnelÂ (KMPs) of the Company. The role of CEO is being performed by CMD and the role of CFO is performed by Director (Finance)Â of the Company.

The Ministry of Power, vide Order no. 46/2/2019-RE [247264] dated November 5, 2020, had appointed Shri Sanjay Malhotra, IAS (DIN 00992744) as Chairman and Managing Director of the Company, with effect from the date on which he assumesÂ the charge of the post. Shri Sanjay Malhotra took over the charge as Chairman and Managing Director of the Company onÂ November 9, 2020.

Prior to the joining of Shri Sanjay Malhotra, Shri Sanjeev Kumar Gupta (DIN 03464342), Director (Technical) was holding additional charge as Chairman and Managing Director of the Company during the period June 1, 2020 to November 8, 2020Â pursuant to Orders of the Ministry of Power dated June 12, 2020, September 10, 2020 and November 24, 2020 respectively.

The Ministry of Power vide Order no. 46/9/2011-RE [228164] dated April 21, 2020, had also appointed Shri Ajoy Choudhury (DIN 06629871) as Director (Finance) of the Company with effect from June 1, 2020. Shri Ajoy Choudhury was formerlyÂ Executive Director (Finance) in the Company.

The Ministry of Power, vide Order no. 46/8/2015-RE [227696] dated November 5, 2020, had appointed Shri Tanmay Kumar, IAS (DIN 02574098), Joint Secretary, Ministry of Power as Government Nominee Director on the Board of REC with immediateÂ effect and until further orders, vice Shri Mritunjay Kumar Narayan, IAS (DIN 03426753), Joint Secretary, who was earlierÂ nominated on the Board of Directors of REC as Government Nominee Director.

During the financial year 2020-21, Shri Ajeet Kumar Agarwal (DIN 02231613), Director (Finance) who was also holding the additional charge of Chairman and Managing Director of REC upto May 31, 2020, superannuated from the services of theÂ Company and ceased to be a Director since June 1,2020. The Board places on record appreciation for the esteemed contributionÂ made by Shri Ajeet Kumar Agarwal and Shri Mritunjay Kumar Narayan, during their tenure as Directors of the Company.

The Company Secretary & Compliance Officer of the Company is Shri J.S. Amitabh.

After the completion of tenure or cessation of office of all erstwhile Independent Directors of the Company, including Woman Independent Director during the financial year 2019-20, the composition of the Board and some Committees thereof, was not inÂ conformity with the provisions of the Companies Act, 2013, SEBI (Listing Obligations & Disclosure Requirements) Regulations,Â 2015 and DPE Guidelines on Corporate Governance for CPSEs, 2010 for the year. The Company has already requested theÂ Ministry of Power, Government of India, i.e., the appointing authority, to expedite the appointment of the requisite number ofÂ Independent Directors, including Woman Independent Director on the Board of the Company, to enable compliance with theÂ applicable statutory provisions.

In accordance with the provisions of the Companies Act, 2013 and Article 91 (iv) of the Articles of Association of the Company, Shri Praveen Kumar Singh (DIN 03548218), Nominee Director of PFC shall retire by rotation at the ensuing 52^ndÂ AnnualÂ General Meeting of the Company and being eligible, offers himself for re-appointment till the date of his superannuation fromÂ the holding company or until further orders, whichever is earlier. The Board of Directors recommends his re-appointment. BriefÂ resume and other particulars of Shri Praveen Kumar Singh are annexed to the Notice of AGM.

25. Â Â Â EVALUATION OF BOARD OF DIRECTORS / INDEPENDENT DIRECTORS

As per the statutory provisions, a listed company is required to disclose in its Board's Report, a statement indicating the manner in which formal annual evaluation of the performance of the Board, its Committees and individual Directors has been madeÂ and the criteria for performance evaluation of its Independent Directors, as laid down by the Nomination & RemunerationÂ Committee.

However, the Ministry of Corporate Affairs vide its notification dated June 5, 2015 has,Â inter-alia,Â exempted Government companies from the above requirement, in case the Directors are evaluated by the Ministry or Department of the CentralÂ Government which is administratively in charge of the company, as per its own evaluation methodology. Further, MCA videÂ notification dated July 5, 2017, also prescribed that the provisions relating to review of performance of Independent DirectorsÂ and evaluation mechanism prescribed in Schedule IV of the Companies Act, 2013, is not applicable to Government companies.

Accordingly, being a Government company, REC is,Â inter-alia,Â exempted in terms of the above notifications, as the evaluation of performance of all members of the Board of the Company is being done by the administrative ministry i.e., the Ministry ofÂ Power and/or by the Department of Public Enterprises (DPE). During the financial year 2020-21, the performance evaluationÂ of Non-Executive Directors of the Company was carried out by the administrative ministry, as per its internal guidelines.

Further, your Company also enters into Memorandum of Understanding (MoU) with its holding company, PFC, under the framework prescribed in MoU Guidelines issued by the DPE. The MoU demarcates key performance parameters for theÂ Company finalized in consultation with the Ministry of Power, Government of India and the performance of the Company isÂ evaluated vis-a-vis the MoU parameters.

26. Â Â Â DIRECTORS' RESPONSIBILITY STATEMENT

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

(i) Â Â Â in the preparation of the annual accounts for the year ended March 31, 2021, the applicable Accounting Standards haveÂ been followed and no material departures have been made from the same;

(ii) Â Â Â such accounting policies have been selected and applied consistently (except for the adoption of newly effective IndianÂ Accounting Standards as disclosed in the Notes to Accounts to the Financial Statements) and judgments and estimatesÂ 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 endÂ of the financial year and of the profit of the Company for that period;

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

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

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

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

27. Â Â Â MoU RATING AND AWARDS

The perfomance of the Company, in terms of the Memorandum of Understanding (MoU) signed with the Ministry of Power, Government of India for the financial year 2018-19 was rated as 'Excellent' and the MoU rating for the financial year 2019-20Â is awaited.

During the financial year 2020-21, REC has won various awards and recognitions, including:

â¢ Â Â Â Best Organization for Women Empowerment at Women Achievers Awards 2020 by Exchange4Media

â¢ Â Â Â 10^thÂ PSE Excellence Award 2019 in Corporate Governance (as runner-up in Maharatna & Navratna category)

â¢ Â Â Â SKOCH Award for Response to Covid

â¢ Â Â Â Mahatma Award for CSR Excellence 2020

â¢ Â Â Â National PSU Excellence Awards for CSR, IT, Environment and HR

â¢ Â Â Â CSR Shining Star Award for Women Empowerment

REC's Corporate Communication team is recognized as one of the Top 30 Corporate Communication Teams in India, by Reputation Today.

28. Â Â Â âTHINK GREEN, GO GREEN' INITIATIVE

The Companies Act, 2013 permits companies to send documents like Notice of Annual General Meeting, Annual Report etc. through electronic means to its members at their registered email addresses. As a responsible corporate citizen, the CompanyÂ has actively supported the implementation of 'Green Initiative' of the Ministry of Corporate Affairs (MCA) and effected electronicÂ delivery of Notices and Annual Reports to shareholders, whose email ids are registered. The intimation of dividend (interim/Â final) is also being sent electronically to such shareholders.

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 votesÂ electronically in respect of resolutions set forth in the Notice of Annual General Meeting (AGM). The Company will also beÂ conducting the AGM this year through video conferencing / other audio-visual means. Members can refer to the detailedÂ instructions for e-voting and electronic participation in the AGM, as provided in the Notice of AGM.

Members, who have not registered their e-mail addresses so far, are requested to register their e-mail addresses with the Registrar and Share Transfer Agent (R&TA) of the Company or their respective Depository Participant (DP) and take part in theÂ green initiative.

29. Â Â Â OBSERVANCE OF SWACHHTA PAKHWADA

REC observedÂ Swachhta PakhwadaÂ during May 16, 2020 to May 31, 2020 and organized various activities under the same. The Company hosted a campaign on social media, creating awareness about sanitization of office premises and homes. TheÂ Company also used its twitter handle to disseminate the message ofÂ Swachhta Pakhwada.Â A dedicated section was createdÂ on the website of the Company, containing information regarding initiatives taken by REC for sanitization of office premises.Â Various regional offices of REC carried out distribution ofÂ 'Swachhta'Â kits to the needy containing handwash, gloves, face maskÂ and dusters etc. REC Chennai office distributed such kits to around 350 families in slum areas near Mylapore, Chennai. RECÂ Jaipur office also distributed such kits to the needy in slum areas in and around Jaipur. Further, other offices of REC carriedÂ out similar activities in their nearby areas and helped in spreading the message of cleanliness in different parts of the country.

30. Â Â Â RIGHT TO INFORMATION ACT, 2005

Your Company has taken necessary steps for the implementation of Right to Information Act, 2005 (RTI) in the Company. An independent RTI Cell has been set up for coordinating the work relating to receipt of applications & appeals and furnishing theÂ information & disposal of appeals. RTI Handbook, both in English and Hindi, has been placed on REC website.

Sl. no. Particulars Â Â Â Nos. of RTI

1. Â Â Â Applications receivedÂ Â Â Â 252

2. Â Â Â Applications disposed ofÂ Â Â Â 246

3. Â Â Â Applications disposed of subsequently (but within the statutory timelines)Â Â Â Â 6

4. Â Â Â First appeals received by Appellate Authority, RECÂ Â Â Â 15

5. Â Â Â First appeals disposed of by Appellate Authority, RECÂ Â Â Â 15

6. Â Â Â Second appeals received from Central Information CommissionÂ Â Â Â 3

7. Â Â Â Second appeals disposed of by Central Information CommissionÂ Â Â Â 3

The status of RTI applications and appeals received during the financial year 2020-21 was as under:

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

The Guidelines for MSMEs, as defined in the purchase procedure, are being followed in the Company. As an endeavor to foster the Government's ambitious initiatives for the promotion of MSME sector and in order to surpass the prescribed publicÂ procurement norms, revised with effect from November 2018, REC has already made it mandatory to procure 100% of certainÂ common use goods and services valuing upto '10 lakh from MSME vendors and also to allow price preference of upto 50%Â to MSEs, out of which 20% is reserved for SC, ST and women entrepreneurs. Further, REC is already registered at GeMÂ (Government e-Marketplace),Â SambandhÂ andÂ SamadhanÂ portals and all offices of REC are effectively using the same.

During the financial year 2020-21, total procurement made by the Company was '11.65 crore, out of which MSME procurement amounted to '8.24 crore (71%), procurement from SC/ST amounted to '0.56 crore (7%) and procurement from womenÂ entrepreneurs amounted to '0.21 crore (2.5%).

REC not only achieved but exceeded its targets set by the Government of India for procurement from GeM portal and for procurement from MSMEs (achieved 71% against the target of 25%). Further, there was no complaint against REC on theÂ Government of India's MSME Samadhan portal during the year, regarding delay in payments or any other grievance by MSMEÂ vendors.

REC has made it compulsory for all its Pan-India offices to have 100% procurement of common goods and services through GeM portal only. Further, in order to make this endeavor successful, REC has also conducted a comprehensive GeMÂ procurement training programme, having specially featured sessions of faculty from GeM. The same was attended and praisedÂ overwhelmingly by all the participants.

REC is also registered on TReDS (Trade Receivables Discounting System) portal and is poised to let its presence felt on this forum for bill discounting by MSME vendors. Further, REC has also conducted its Annual Vendor Development ProgrammeÂ (VDP) through online session due to Covid-19 pandemic, which was attended by various vendors. REC's Public ProcurementÂ Policy for MSMEs is included in all the tenders duly published on the website of the Company and on the CPPP (CentralÂ Public Procurement Portal). The same is also being critically examined and monitored on quarterly and annual basis by theÂ Independent External Monitor (IEM) appointed by CVC. The IEM has appreciated the efforts and achievements of REC forÂ various compliances and found that all procurement activities are in order.

32. Â Â Â DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION ANDÂ 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 harassmentÂ of women employees. The committee is headed by a senior woman official of the Company and includes representative ofÂ NGO as one of its members. Anti-sexual harassment stance of the Company is also outlined in REC (Conduct, Discipline andÂ Appeal) Rules.

During the financial year 2020-21, the Company did not receive any complaint of sexual harassment.

33. Â Â Â ANNUAL RETURN

The Annual Return of the Company is available onÂ https://www.recindia.nic.in/annual-returns.

34. Â Â Â PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of Related Party Transactions required to be disclosed in Form AOC-2 for the financial year 2020-21 were 'Nil'.

35. Â Â Â AUDITORS

Statutory Auditors

M/s S.K. Mittal & Co., Chartered Accountants, New Delhi (Firm Registration No.: 001135N) and M/s O.P Bagla & Co. LLP, Chartered Accountants, New Delhi (Firm Registration No.: 000018N/N500091) were appointed as Statutory Auditors of yourÂ Company for the financial year 2020-21 by the Comptroller & Auditor General (C&AG) of India. The Statutory Auditors haveÂ audited the Financial Statements of the Company for the financial year ended March 31, 2021.

Further, the appointment of the Statutory Auditors for the financial year 2021-22 is yet to be made by the Comptroller & Auditor General (C&AG) of India. Approval of the Members of the Company will be obtained in ensuing Annual General Meeting, toÂ authorize the Board of Directors of the Company, to fix the remuneration of Statutory Auditors for the financial year 2021-22,Â as may be appointed by C&AG.

Secretarial Auditors

M/s Hemant Singh & Associates, Company Secretaries (Certificate of Practice No. 6370), New Delhi, were appointed as Secretarial Auditors for carrying out Secretarial Audit of the Company for the financial year 2020-21. In terms of Section 204 ofÂ the Companies Act, 2013 and Rules made thereunder, they have issued Secretarial Audit Report for the financial year 2020-21Â and the same is annexed to this Report.

35.1 Management's Comments on the Auditors' Report

The Statutory Auditors have audited the standalone and consolidated financial statements of the Company for financial year 2020-21 and have given their reports without any qualification, reservation, adverse remark or disclaimer. The Auditors'Â Report(s) are forming part of this Annual Report.

The Secretarial Auditors of the Company have given an unqualified report for the financial year 2020-21. However, they have certain observations relating to composition of the Board and its Committees. The management's reply to the observations ofÂ the Secretarial Auditors is as under:

Observation of Secretarial Auditors Â Â Â Managements Reply

1. Â Â Â The Company did not have requisite number of Independent REC is a Government Company and as per the provisions of

Directors on the Board including a woman director as Article 91 of Articles of Association of the Company, the power required under section 149 of the Companies Act, 2013 to appoint Directors on the Board of the Company vests withÂ read with Regulation 17 of SEBI (Listing Obligations and the President of India, acting through the administrativeÂ Disclosure Requirements) Regulations, 2015.Â Â Â Â ministry, i.e., the Ministry of Power, Government of India.

2. Â Â Â The composition, chairmanship and quorum of meetings After the completion of tenure, resignation or cessation ofÂ of Audit Committee, Nomination & Remuneration office of all erstwhile Independent Directors of REC includingÂ Committee and Stakeholders Relationship Committee Woman Independent Director in the financial year 2019-20,Â were not in compliance with section 177 & 178 of the there are no Independent Directors and Woman IndependentÂ Companies Act, 2013 read with regulation 18, 19 & 20 of Director on the Board at present.

^{SEBI (Listing Obligations and Disclosure Requirements)}Â _{Accordingly, the composition of REC's Board, includingÂ}^Regulations,Â ^{2015 due to non-availability of any}Â composition of some Committees thereof, which requireÂ ^{Independent Director on the Board of REC}.Â Â Â Â presence of Independent Directors, was not in conformity

3. Â Â Â The composition of Corporate Social Responsibility with the applicable statutory provisions. Further, separateÂ Committee was not in compliance with section 135(1) of meeting of Independent Directors could also not be held forÂ the Companies Act, 2013 due to non-availability of any the same reason.

^{Independent Director on the Board of REC}. Â Â Â The Company has requested the Ministry of Power for

4. Â Â Â The Company did not comply with regulation 25(3) & (6) of appointing requisite number of Independent Directors,Â SEBI (Listing Obligations and Disclosure Requirements) including Woman Independent Director, on the Board of theÂ Regulations, 2015 with respect to appointment of Company. The request of REC is under consideration of theÂ Independent Directors within the stipulated time & Ministry of Power.

^{holding of at least one meeting of Independent Directors}Â _{Once, the requisite number of Independent and WomanÂ}^{during the financial year}.Â Â Â Â Directors are appointed by the Ministry of Power, the Company

will comply with all the applicable statutory provisions.

36. Â Â Â COMMENTS OF C&AG OF INDIA

The Comptroller & Auditor General (C&AG) of India, vide letter(s) dated July 30, 2021 has given 'Nil' comments on the Audited Financial Statements of the Company for the year ended March 31,2021 under Section 143(6)(a) of the CompaniesÂ Act, 2013. The Comments of C&AG for the financial year 2020-21 have been placed along with the report of StatutoryÂ Auditors of the Company in this Annual Report.

37. Â Â Â DEBENTURE TRUSTEES

In compliance with SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a list containing the details of Debenture Trustees appointed by the Company for different series of its bonds and debentures issued from time to time, isÂ annexed to this Report.

38. Â Â Â STATUTORY DISCLOSURES

a) Â Â Â There was no change in the nature of business of the Company during the financial year 2020-21.

b) Â Â Â The Company has not accepted any public deposits during the financial year 2020-21 and the Board of Directors of theÂ Company has passed requisite resolution in this regard, in compliance of RBI Guidelines.

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

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

e) Â Â Â Information on composition, terms of reference and number of meetings of the Board and its Committees held during theÂ year, establishment of Vigil Mechanism/Whistle Blower Policy and web-links for familiarization/training policy of Directors,Â Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions, Policy for determiningÂ Material Subsidiaries, Compensation to Key Managerial Personnel, sitting fees to Directors and details regarding IEPFÂ etc. have been provided in the 'Report on Corporate Governance', prepared in compliance with the provisions of SEBIÂ (Listing Obligations & Disclosure Requirements) Regulations, 2015, as amended from time to time, which forms part ofÂ this Annual Report.

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

g) Â Â Â Since the provisions of Section 197 of the Companies Act, 2013 and Rules made thereunder relating to managerialÂ remuneration, are not applicable to Government companies, therefore no disclosure is required to be made.

h) Â Â Â There are no material changes and commitments affecting the financial position of the Company, which has occurredÂ between the end of the financial year i.e., March 31, 2021 and the date of this report.

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

j) Â Â Â The details related to vigilance cases, replies to audit objections and RTI matters etc., as applicable, are duly incorporatedÂ in this report, as required vide OM dated January 24, 2018 of the Ministry of Parliamentary Affairs, Government of India.

k) Â Â Â The Central Government has not prescribed the maintenance of cost records for the products/services of the CompanyÂ under the Companies (Cost Records and Audit) Rules, 2014 read with the Companies (Cost Records and Audit) AmendmentÂ Rules, 2014 prescribed by the Central Government under Section 148 of the Companies Act, 2013. Accordingly, costÂ accounts and records are not required to be maintained by the Company.

l) Â Â Â During the year under review, the statutory auditors / secretarial auditors have not reported to the Audit Committee, anyÂ instances of fraud committed against the Company by its officers or employees.

m) Â Â Â The Company, within its ambit, is compliant with the applicable Secretarial Standards issued by the Institute of CompanyÂ Secretaries of India.

n) Â Â Â No new Independent Directors were appointed on the Board of Directors of the Company during the financial yearÂ 2020-21, therefore no disclosure is required to be made under Rule 8(5)(iiia) of the Companies (Accounts) Rules, 2014.

o) Â Â Â The Company has adequate internal financial controls with reference to the Financial Statements.

p) Â Â Â As on March 31, 2021, there was no application made or proceeding pending against REC, for initiation of CorporateÂ Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016. Further, details of difference betweenÂ amount of valuation done at the time of one-time settlement and the valuation done while taking loan from the banks orÂ financial institutions, are not applicable.

q) Â Â Â The Objects Clause of Memorandum of Association (MoA) of the Company was last amended in year 2009. Since then,Â the power sector scenario in the country has undergone a paradigm change and newer business opportunities areÂ emerging. Further, as per the provisions of the Companies Act, 2013, the Objects Clause of MoA is to be bifurcated intoÂ two categoriesÂ viz.Â (i) Objects for which the Company is established and (ii) Matters considered necessary in furtheranceÂ thereof. Therefore, in order to align the Objects Clause of MoA with the requirement of the Companies Act, 2013 and withÂ a view to enable the Company to tap emerging business opportunities in the power sector and explore potential in newÂ areas of business, a proposal for alteration in the Objects Clause of MoA is submitted for approval of the shareholders asÂ a Special Resolution, details of which are appearing in the Notice of the AGM.

39. NEW OFFICE BUILDING AT GURUGRAM

REC has recently started functioning from its new office building at Gurugram, Haryana, which now houses its Corporate Office. It is a state-of-the-art Net Zero building with a 964kWp Solar PV plant at the rooftop supported by pergola structureÂ and several unique features such as fair finish white concrete surfaces, raised flooring, radiant cooling for slabs to reduceÂ power consumption of air conditioning, Integrated Building Management System (IBMS), automated sensor-controlledÂ lighting, bio-climatic glass fagade with motorized blinds and an auditorium.

The building is constructed by contractor JMC Project (India) Limited under supervision of project management consultant Telecommunications Consultants India Limited (a Government of India enterprise) and M/s CWA, New York as project architect.

40. Â Â Â INTEGRATED REPORT

An 'Integrated Report' of the Company as per SEBI Circular dated February 6, 2017 for the financial year 2020-21, is prepared and annexed to this Report.

41. Â Â Â STATUTORY AND OTHER INFORMATION REQUIREMENTS

Information required to be furnished as per the Companies Act, 2013, SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, DPE Guidelines on Corporate Governance for CPSEs, 2010 and other applicable statutory provisions isÂ annexed to this report as under:

Particulars	Annexure
Management Discussion & Analysis Report	I
Report on Corporate Governance	II
Business Responsibility Report	III
Integrated Report	IV
Secretarial Audit Report	V
Auditors' Certificate on Corporate Governance	VI
Annual Report on CSR Activities	VII
Details of Debenture Trustees appointed for different series of Bonds	VIII

42. ACKNOWLEDGEMENTS

The Directors thank the Ministry of Power, Ministry of Finance, Ministry of Corporate Affairs, NITI Aayog, Department of Investment and Public Asset Management, Department of Public Enterprises, Reserve Bank of India, Securities & ExchangeÂ Board of India and the Comptroller & Auditor General of India, for their co-operation, support and guidance in effectiveÂ management of the Company's affairs and resources. The Directors also thank Power Finance Corporation Limited, the holdingÂ company, for continued support.

The Directors whole heartedly thank all shareholders, investors, lenders and bond holders of the Company, for their goodwill and support. The Directors extend their gratitude towards all customers and borrowers, including State Governments, StateÂ Electricity Boards, State power utilities and independent power producers for reposing their trust and association with theÂ Company.

The Directors are grateful to the Statutory Auditors, Secretarial Auditors and other professionals associated with the Company, for their continuous value addition. Last but not the least, the Directors appreciate all employees of the Company, for workingÂ tirelessly despite the pandemic, towards the success of the Company.

For and on behalf of the Board of Directors

oy" <3Â 1

San jay M alhotra Chairman and Managing Director

(DIN: 00992744)

Place : New Delhi Date :Â August 27, 2021

PE Ratio is calculated based on closing price of RECâs Equity Share at NSE, as on March 31, 2021 and as on March 31, 2020 respectively.

5.4 Resource mobilization

During the financial year 2020-21, the Company mobilized funds of '99,244.53 crore from the market. This included '21,053 crore by way of rupee term loans from banks and financial institutions, '3,550 crore by way of short-term loans fromÂ banks, '5,312.10 crore by way of Capital Gains Tax Exemption Bonds, '48,101.40 crore by way of Institutional Bonds andÂ '558.40 crore by issue of Perpetual Debt Instruments (PDI). The Company also mobilized funds of '20,669.63 crore during theÂ year under review, equivalent to USD 1,995.00 million from external commercial borrowing, USD 785.00 million from FCNRÂ (B) and USD 6.89 million from Official Development Assistance (ODA), totaling to USD 2,786.89 million. No funds were raisedÂ through commercial paper during the financial year 2020-21.

In order to meet the Government of India's funding requirement of DDUGJY and SAUBHAGYA schemes, the Company had also raised an amount of '2,500 crore during the financial year 2020-21 through Institutional Bonds issued on private placementÂ basis. The repayment of principal and service of interest on these bonds shall be made by the Government of India through theÂ Ministry of Power.

Perpetual Debt Instruments

REC raised an amount of '558.40 crore by issue of Perpetual Debt Instruments (PDI). During the financial year 2020-21, the Company has issued 5,584 Perpetual Debt Instruments (Series 206) of face value of '10 lakh each, aggregating toÂ '558.40 crore, which carry coupon rate of 7.97%. The PDI have no maturity and are callable only at the option of the CompanyÂ after 10 years. The said instruments form 1.44% of the Tier-I capital of the Company ('38,744.95 crore) as on March 31,2021.Â The first interest payment of these instrument shall be due in financial year 2021-22. Detailed disclosure on PDI is appearingÂ in note no. 25 of the standalone financial statements forming part of this Annual Report.

Mar 31, 2018

The Shareholders,

The Directors have pleasure in presenting the Forty Ninth Annual Report together with the Audited Financial Statements of your Company for the financial year ended March 31, 2018.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the financial year 2017-18 were as under with comparative position of previous yearâs performance:

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (Rs.in crore)

Parameter	FY 2017-18	FY 2016-17
Loans Sanctioned	1,07,534.05	83,870.82
Disbursements	61,712.47	58,038.61
Subsidy under DDUGJY (including DDG) &Â Saubhagya	10,568.72	8,037.54
Total Recoveries (including interest)	46,351.13	46,747.17
Total Operating Income	22,358.27	23,587.30
Profit Before Tax	6,852.09	8,860.70
Profit After Tax	4,647.00	6,245.76

1.2 Â Â Â Financial Performance

The total operating income of your Company for the financial year 2017-18 was Rs.22,358.27 crore as compared to Rs.23,587.30 crore during the financial year 2016-17. The profit after tax for financial year 2017-18 was Rs.4,647 crore as compared to Rs.6,245.76 crore for the financial year 2016-17.

Gross Loan asset book of your Company as on March 31, 2018 was Rs.2,39,449.34 crore as compared to Rs.2,01,928.67 crore in the previous year. The outstanding borrowings as on March 31, 2018 was Rs.1,98,791.51 crore.

Earnings Per Share (EPS) for the financial year ended March 31, 2018 was Rs.23.53 per share of Rs.10/- each. Net worth of the Company as on March 31, 2018 has increased by 6% to Rs.35,491 crore from Rs.33,326 crore.

1.3 Â Â Â Dividend

The Board of Directors of your Company has recommended final dividend of Rs.1.75 per share for the financial year 2017-18, which is subject to approval of the Shareholders in the 49^th Annual General Meeting. This is in addition to the interim dividend of Rs.7.40 per share for the financial year 2017-18, paid in February, 2018. The total dividend for the financial year 2017-18 will work out to Rs.9.15 per equity share, representing 91.50% of the paid-up share capital of the Company as against Rs.9.65 per share, representing 96.50% of the paid-up share capital of the Company in the previous year. The total dividend pay-out for the financial year 2017-18 will amount to Rs.1,807.05 crore (excluding dividend distribution tax).

1.4 Â Â Â Share Capital

As on March 31, 2018, the Authorized Share Capital of the Company was Rs.5,000 crore consisting of 500 crore equity shares of Rs.10/- each and the issued &Â paid up share capital of the Company was Rs.1,974.92 crore consisting of 197,49,18,000 equity shares of Rs.10/- each.

The President of India acting through Ministry of Power, Government of India divested/sold 1,08,25,689 equity shares i.e. 0.54% Â Â Â of total paid up capital of the Company on November 23, 2017 through off market sale of shares under âBharat 22 Exchange Traded Fundâ. Accordingly, as on March 31, 2018, the President of India held 1,15,16,78,783 equity shares 1.e. Â Â Â 58.32% of the paid up equity share capital of the Company.

Further, during the financial year 2018-19, the President of India acting through Ministry of Power, Government of India divested/sold 64,73,244 equity shares i.e. 0.33% of total paid up capital of the Company on June 18, 2018 through off market sale of shares under âBharat 22 Exchange Traded Fundâ. Accordingly, as on date, the President of India holds 1,14,52,05,539 equity shares i.e. 57.99% of the paid up equity share capital of the Company.

1.5 Change of Name of the Company

Considering that âRECâhas become a brand name and is recognized by public at large in India &Â abroad and to correctly display the remarkable presence of your Company in financing all segments of Indian Power Sector viz. generation, transmission, distribution, renewable energy, etc. and to remove the myth that the Company is mainly into the business of rural electrification, the Board of Directors of the Company in its meeting held on May 28, 2018, had proposed change of the name of the Company from âRural Electrification Corporation Limitedâ to âREC Limitedâ, subject to the approval of shareholders and other approvals as may be required.

Further, Ministry of Power, Government of India vide letter dated August 9, 2018, has accorded approval for change of name of the Company to âREC Limitedâ.

2. Â Â Â LOANS SANCTIONED

The Company sanctioned loans worth Rs.1,07,534.05 crore during the financial year 2017-18, as against Rs.83,870.82 crore in the previous year. The state-wise and category-wise break-up of loans sanctioned during the financial year are given in Table-1 and Table-2, respectively. The cumulative sanctions upto March 31, 2018 made by your Company since its inception was Rs.8,72,884.10 crore, as detailed in Table-3.

3. Â Â Â DISBURSEMENTS

A total sum of Rs.61,712.47 crore was disbursed during the financial year 2017-18 as against Rs.58,038.61 crore in the previous year. In addition to that, grant/subsidy of Rs.10,568.72 crore {Rs.9,028.09 crore (including Rs.262.60 crore under DDG) under DDUGJY and Rs.1,540.63 crore under Saubhagya scheme} provided by Government of India, was disbursed to the States/ Implementing Agencies. The cumulative amount disbursed since inception up to March 31, 2018 was Rs.4,49,289.49 crore excluding subsidy under Government programmes. The state-wise disbursements and repayment of loan by borrowers during the financial year 2017-18 together with cumulative figures and outstanding as on March 31, 2018 are given in Table-4.

4. Â Â Â RECOVERIES

4.1 Â Â Â 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 2017-18 was Rs.46,236 crore as compared to Rs.46,298 crore during the previous year. The Company recovered a total sum of Rs.45,566 crore towards performing assets during the financial year 2017-18 as against Rs.45,169 crore during the previous year. The Company achieved recovery rate of 98.55% for the financial year 2017-18. The overdues from defaulting borrowers pertaining to performing assets as on March 31, 2018 was Rs.1,762 crore. Further, an amount of Rs.785.13 crore has been recovered from non-performing assets during financial year 2017-18 as against Rs.1,578 crore recovered during financial year 2016-17.

4.2 Â Â Â During the year under review, RBI vide its circular dated February 12, 2018 has notified Revised Framework for Resolution of Stressed Assets, which per se was not applicable to REC, being an NBFC. However, as a matter of prudence, loans amounting to Rs.9,591 crore have been classified as Non-performing Assets (NPAs) during the year, in line with the above circular.

Accordingly, as on March 31, 2018, the Gross NPAs were Rs.17,128 crore (7.15% of Loan Assets) and the Net NPAs were Rs.13,612 crore (5.68% of Loan Assets). However, the Gross NPAs were Rs.7,537 crore (3.14% of Loan Assets) and the Net NPAs were Rs.4,980 crore (2.07% of Loan Assets), without considering the impact of the above RBI circular. Further, no doubtful loans have been rescheduled by the Company, during the financial year 2017-18.

The details of loans rescheduled during the financial year 2017-18 and their position as on March 31, 2018, are as under:

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (Rs.in crore)

Particulars		FY 2017-18	FY 2016-17
Standard Loans	No. of Borrowers	8	19
Â	Amount Outstanding	12,677.10	27,784.80
Sub-Standard Loans	No. of Borrowers	1	0
Â	Amount Outstanding	1,970.18	0
Total	No. of Borrowers	9	19
Â	Amount Outstanding	14,647.28	27,784.80

5. FINANCIAL REVIEW

5.1 Summary of Financial Results

The summary of audited financial results of the Company for the financial year 2017-18 vis-a-vis 2016-17 is given as under:

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (Rs.in crore)

Particulars	Standalone		Consolidated
Particulars	FY 2017-18	FY 2016-17	FY 2017-18	FY 2016-17
Revenue from Operations	22,358.27	23,587.30	23,054.42	24,194.92
Other Income	82.04	183.28	46.98	166.31
Total Income	22,440.31	23,770.58	23,101.40	24,361.23
Finance Costs	13,829.52	13,450.35	13,859.59	13,461.59
Other Operating Expenses	343.15	350.06	879.51	816.97
Provisions and Contingencies	1,415.55	1,109.47	1,421.06	1,110.31
Total Expenses	15,588.22	14,909.88	16,160.16	15,388.87
Profit Before Tax	6,852.09	8,860.70	6,941.24	8,972.36
Provision for Taxation	2,205.09	2,614.94	2,251.78	2,658.99
Profit After Tax	4,647.00	6,245.76	4,689.46	6,313.37
Add: Opening Balance of Surplus account	8,714.47	6,706.34	9,001.69	6,932.34
Less: Adjustment of MTM in respect of Interest Rate Swaps	-	86.75	-	86.75
Add: Other Adjustments during the year	-	-	2.26	1.72
Amount available for appropriation	13,361.47	12,865.35	13,693.41	13,160.68
Less : Appropriations	Â	Â	Â	Â
Transfer to Special Reserve u/s 36(1)(viii) of the Income Tax Act, 1961	1,582.49	1,881.06	1,582.49	1,881.06
Transfer to Reserve for Bad &Â Doubtful Debts u/s 36(1)(viia) of the Income Tax Act, 1961	335.80	413.33	335.80	413.33
Dividend	1,984.79	1,382.44	1,984.79	1,382.44
Dividend Distribution Tax	397.88	277.46	405.78	277.46
Transfer to Debenture Redemption Reserve	196.59	196.59	212.64	201.20
Transfer to General Reserve	500.00	-	500.00	3.50
Surplus carried over to Balance Sheet	8,363.92	8,714.47	8,671.91	9,001.69

The figures of dividend and dividend distribution tax does not include the respective amounts pertaining to Final Dividend for the financial year 2017-18 (as detailed in para 1.3 above) considering that the Company is not required to make any provision in this regard in terms of Revised Accounting Standard 4.

5.2 Contribution to National Exchequer

During the financial year 2017-18, your Company contributed an amount of Rs.3,764.93 crore as compared to Rs.4,097.79 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, IGST &Â CGST and Service Tax paid including CENVAT credit, as detailed below:

Particulars	FY 2017-18	FY 2016-17
Dividend paid to the Government of India	1,160.30	1,126.05
Dividend Distribution Tax	397.88	379.98
Direct Taxes	2,166.70	2,546.34
IGST and CGST	23.50	-
Service Tax paid including CENVAT credit	16.55	45.42
Total	3,764.93	4,097.79

5.3 Ratio Analysis

A comparative statement of important ratios of the Company for the financial year 2017-18 vis-a-vis 2016-17 is as below:

Particulars	FY 2017-18	FY 2016-17
Earnings Per Share (Rs.)	23.53	31.63
Return on Average Net Worth (%)	13.51	20.17
Book Value per Share (Rs.)	179.71	168.75
Debt Equity Ratio (times)	5.60	5.03
Price Earnings Ratio (times)*	5.30	5.72
Interest Coverage Ratio (times)	1.50	1.64

*PE Ratio has been calculated on the basis of Closing Price of equity share of REC at NSE as on March 28, 2018 &Â March 31, 2017, respectively.

5.4 Resource Mobilization

The Company mobilized Rs.51,164.89 crore from the market during the financial year 2017-18. This comprised of Rs.9,565.50 crore (includes Rs.1,469.23 crore towards Bonds Application money) by way of Capital Gain Tax Exemption Bonds and Rs.26,145 crore by way of Institutional Bonds. The Company also mobilized funds of Rs.15,454.39 crore equivalent to USD 2,293.37 million [USD 1,807.50 million from external commercial borrowing and USD 485.87 million from FCNR(B)] during the financial year 2017-18. Further, in addition to above, an amount of Rs.12,114.85 crore was also raised through Commercial Paper.

Further, for meeting Government of Indiaâs funding requirement of DDUGJY Scheme, the Company, during the year, has also raised an aggregate amount of Rs.4,000 crore through Institutional Bonds on private placement basis. The repayment of principal and interest of these bonds shall be made by Government of India by making suitable budget provisions in the demand of Ministry of Power.

Disclosure of Green Bonds issued by REC

During the financial year 2017-18, REC became the first PSU to raise USD 450 million Green Bond for a tenor of ten years which witnessed a phenomenal response from investors across Asia and Europe with oversubscription of 6.7 times ($3.01 Billion offer for a book of $450 Million). These bonds are a step towards realization of the Honâble Prime Ministerâs vision of harnessing green energyâs enormous potential in the country and to achieve the targeted capacity of 175 GW by 2022. The Green Bonds are listed on the International Securities Market (ISM) segment of London Stock Exchange and also on Singapore Stock Exchange.

KPMG, India has provided its post-verification Independent Assurance Report based on the Green bond framework of REC and the same has also been certified by the Climate Bonds Standard Board of Climate Bond Initiative on July 17, 2018.

Use of Proceeds: The proceeds have been utilized to finance Solar, Wind and Renewal Purchase Obligations including refinancing of eligible projects as defined in the Green Bond framework of REC, contributing to positive environmental impact and also strengthening Indiaâs energy security by reducing fossil fuel dependency.

REC has created a âGreen Portfolioâwhich was managed through a well laid internal tracking system, updated on regular basis, to monitor, establish and account for the allocation of the proceeds for such Green Portfolio.

Management of Proceeds: Pending the full allocation to Eligible Green Projects, balance of the proceeds during intervening period were invested in instruments permitted as per the Green Bond Framework. The net proceeds from the Bonds amounting to Rs.2,894 crore were allocated against the following projects as on March 31, 2018:

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (Rs.in crore)

Sl. No.	Location		Capacity (in MW)	Loan sanction date	Loan sanction Amount	Outstanding Amount on March 31, 2018	Â
Solar							Â
1.	Telangana	45		September 9, 2016	269.50	267.22
2.	Telangana	30		September 9, 2016	179.62	177.42
3.	Karimnagar, Telangana	15		November 11, 2016	89.84	88.80
4.	Chitradurga, Karnataka	10		January 27, 2016	53.81	50.22
Â	Â	Â	Â	Â	Â	Â	Â

5.		Warangal, Telangana	15	November 11, 2016	89.84	89.05
6.		Andhra Pradesh	500	February 24, 2016	2,480.00	240.66
7.		Karimnagar, Telangana	15	November 11, 2016	89.84	88.77
8.		Anantpur, Andhra Pradesh	5	February 9, 2015	24.45	22.28
9.		Telangana	30	September 21, 2016	179.62	177.03
10.		Kadapa, Andhra Pradesh	50	April 12, 2017	277.50	225.00
11.		Randa Reddy, Telangana	5	January 27, 2016	26.90	26.90
12.		Mansa,Punjab	50	September 22, 2016	242.84	236.44
13.		Medak, Telangana	7	November 26, 2015	39.90	38.57
14.		Nizamabad, Telangana	15	November 11, 2016	89.84	88.43
15.		Andhra Pradesh	23	February 24, 2016	140.00	57.15
16.		Kadapa, Andhra Pradesh	50	April 12, 2017	277.50	224.01
17.		Karimnagar, Telangana	15	November 11, 2016	89.84	88.79
18.		Nirudanagar, Tamil Nadu	5	July 14, 2015	26.13	24.50
19.		Chitradurga, Karnataka	30	April 17, 2017	150.39	150.39
20.		Kadapa, Andhra Pradesh	50	April 12, 2017	277.50	225.00
21.		Mansa and Sangrur, Punjab	50	May 21, 2016	169.69	157.57
Â		SUB-TOTAL (A)	Â	Â	5,264.55	2,744.20
Wind
1.	Sangli, Maharashtra		10	February 24, 2015	47.09	44.79
2.	Mandasaur, Madhya Pradesh		20	January 28, 2016	86.63	76.41
3.	Tirpur, Tamil Nadu		6.8	June 6, 2012	26.16	21.15
Â	SUB-TOTAL (B)		Â	Â	159.88	142.35
Renewable Energy Obligation (RPO)
1.	Maharashtra		RPO	July 24, 2017	500.00		500.00
2.	Maharashtra		RPO	September 21, 2017	1,000.00		1,000.00
Â	SUB-TOTAL (C)		Â	Â	1,500.00		1,500.00
Â	GRAND TOTAL (A+B+C)		Â	Â	6,924.43		4,386.55
Â	Â	Â	Â	Â	Â	Â	Â

Cash Credit Facilities

The Company has an approved cash credit/WCDL/OD limit of Rs.9,590 crore for availment from various banks for its day-to-day operations.

5.5 Domestic and International Credit Rating Domestic

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

International

REC enjoys international credit rating of âBaa3â and âBBB-â respectively from Moodyâs and FITCH, International Credit Rating Agencies.

5.6 Â Â Â Cost of Borrowing

The overall weighted average annualized interest rate of borrowing for the funds raised during the financial year 2017-18 was 6.17% p.a. and for the borrowings outstanding as on March 31, 2018 is 7.53% p.a. As a result, your Company was able to deliver debt financing at competitive rates.

5.7 Â Â Â Redemption and Pre-Payment

During the year, the Company repaid a sum of Rs.23,210.86 crore. This includes repayment amounting to Rs.10,813 crore to Institutional bondholders, Rs.5,337.78 crore worth of Capital Gain Tax Exemption Bonds, Rs.1.175 crore towards Infrastructure Bonds, Rs.6,720.78 crore of external commercial borrowings and Rs.338.12 crore of Official Development Assistance (ODA) loan. The Company has also redeemed long term loan of Rs.350 crore and Commercial Papers of Rs.9,100 crore.

5.8 Â Â Â Financial status at the close of the year

At the close of the financial year 2017-18, the total resources of your Company stood at Rs.2,46,484.46 crore. Out of this, Equity Share Capital contributed Rs.1,974.92 crore, Reserves and Surplus stood at Rs.33,515.59 crore, Loans from Financial Institutions, Commercial Banks and market borrowings through Bonds and Commercial Papers accounted for Rs.1,98,791.51 crore, Deferred Tax Liabilities of Rs.66.96 crore and other liabilities &Â provisions stood at Rs.12,135.48 crore. These funds were deployed as Long / Short Term Loans of Rs.2,35,933.05 crore (net of provisions of Rs.3,516.27 crore) fixed assets (net of depreciation) of Rs.247.88 crore (including Capital Work in progress), Investments of Rs.2,574.80 crore, Cash &Â Bank Balances of Rs.1,773.53 crore (includes Rs.1,469.23 crore towards Bonds Application money) and other assets of Rs.5,955.20 crore.

5.9 Â Â Â 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, your Company has adopted / amended various policies and guidelines, such as policy for advancing Short Term Loans to private sector borrowers; updation of Appraisal Guidelines in respect of Private Sector Conventional &Â Renewable projects; rationalization of Post-COD interest rate and modification of interest rate reset period for Renewable Energy projects; Comprehensive Risk Management Policy along with project and other risk categorization frameworks; REC policy for investment of Short Term Surplus funds; Succession Planning for key positions; Modification of REC Long Term Investment Policy; New Grading Model and Exposure Norms for State Power Utilities; etc. The new/modified guidelines shall make the Company more competitive and provide a thrust for the business.

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 TRANSMISSION &Â DISTRIBUTION SCENARIO

Transmission and Distribution (T&D) industry is poised at the cusp keeping in view the ongoing policy initiatives to make the sector reliable, healthy, affordable and capable of absorbing the envisaged future growth vis-a -vis capacity addition and reaching the last mile across the Country. The Policy framework has been able to increase the resolve of State Governments to provide reliable power supply to consumers and integration of upcoming Renewable Energy Sources with the Electricity grid.

The installed generation capacity of Central, State as well as Private utilities of the country is now a high of 344 GW, as on March 31, 2018, as per Central Electricity Authority. Further, enormous capacities are planned to be added through renewable sources of energy, with the ambitious goal of 175 GW by 2022. This itself seems fraught with many risks emanating from increasingly lower tariffs from each subsequent bidding, low cost financing tie-ups etc. However, the setting up of dedicated Solar Parks along with making available all major clearances like land, transmission connectivity, raising the Limit of Renewable Purchase Obligation (RPO) etc. by the respective Central / State Government agencies has mitigated these risks to a great extent. The above shall pose requirement for planning in line with upcoming renewable energy capacity developments and creation of infrastructure to ensure system availability with relatively shorter gestation period. Accordingly, dedicated Green Transmission Corridors are being planned along with strengthening / augmenting the transmission system to take care of such supply / loading pattern.

Transmission &Â Distribution system basically consists of Transmission lines (inter-state and intra-state), Sub-stations, Switching Stations, Transformers and Distribution lines etc. at various voltage levels. Distribution is the weakest but central part of the entire power value chain and most difficult to deal with due to various reasons. As the only interface between utilities and consumers, it is the cash register for the entire sector. Therefore, the ever-increasing demand for affordable, reliable and quality power by various classes of consumers makes Distribution Sector all the more challenging task to manage. Proper planning for further transmission and distribution system development in this light and that the energy from different sources, some of which may have a largely intermittent nature viz. energy from Renewable Sources - Solar, Wind, Tidal and biomass etc. has become even more pertinent.

Further, providing unconstrained inter-regional power transfer, open access availability and maintaining the grid discipline reliably are the primary requirements. The task of regulating and reliably maintaining it is taken care of by five RLDCs ; facilities.

As a part of Government of India plan to connect 2,50,000 Gram Panchayats (GP) in the country, BharatNet project has been taken up with the task of development and maintenance of the National Optical Fibre Network in States, namely Andhra Pradesh, Telangana, Himachal Pradesh, Jharkhand and Odisha.

Accordingly, the TRANSCOs and DISCOMs need to create the infrastructure and enhance their capital expenditure during forthcoming years to be able to provide reliable, robust &Â efficient system for transfer of power from generation facilities to sub-stations and up to the consumer end.

Smart technology interventions have been taken up for making the System sturdier such as implementing Synchrophasor Technology in its Wide Area Measurement System (WAMS) Project through installation of PMUs (Phasor Measurement Units) at different locations in all regions across the country for facilitating better visualization and situational awareness of the grid events such as grid robustness, oscillations, angle/voltage instability, system margin as well as decision support tools. The ultimate aim is to build a robust integrated grid network that will allow large transfers of power from one part of the country to another.

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 &Â 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 and overall development of the country.

Distribution sector today faces major challenges like high level of accumulated losses &Â depleted net worth. The two together have affected the financial health of the DISCOMs adversely over the years. 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, delay in 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. In the environment where Utilities are facing difficulty to keep themselves afloat and meet the consumer expectations at the same time, your Company today finances entire gamut of Distribution Projects broadly with the objectives of System Improvement &Â 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 &Â turn around the Power Distribution sector in the country by its involvement in programmes like DDUGJY &Â SAUBHAGYA, NEF and other programmes viz. IPDS, Ujwal DISCOM Assurance Yojana, Financial Restructuring Plan (FRP), Smart Grid Task Force, etc. Your Company, in light of all these major interventions is optimistic that overall Distribution scenario would improve and turnaround in times to come when the impact and outcomes of the above programmes in conjunction with the reform measures taken up by the respective States start trickling in and transform the entire landscape of Distribution.

Increased demand of quality power to the end consumer needs a robust Transmission and Distribution Infrastructure. Therefore, there is a requirement for huge investment in the Transmission and Distribution sector for development of new infrastructure in line with new capacity addition to meet out additional demand and augmentation works including use of IT enabled systems to develop SMART grids.

Technological advancement in mobility including hybrid vehicles, electric vehicles, charging stations with incentivized support of Central Government is also expected to open an entirely new investment opportunity in the area.

6.1 Major reforms in Distribution Sector

Government of India, from time to time, has made all efforts to ensure the overall development of the Sector 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 Green shoots of operational and financial performance are an indication that the Distribution sector is headed in the right direction. 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, to spruce up the operational efficiency, Distribution Franchisees have been engaged in particular areas by some DISCOMs on case to case basis. In the past decade, Government of India has launched 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, efforts for 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 recently DDUGJY and IPDS. Moreover, Ujwal DISCOM Assurance Yojana implemented by Government of India has come as an enabler for Operational and Financial Turnaround of DISCOMs which would in long run help them improve the quality &Â reliability of power supply. Further, NEF - an Interest Subsidy Scheme is also under implementation with objective to promote capital investment &Â expedite the reform process in Distribution sector. The financial outlay of DDUGJY and IPDS should provide considerable fillip to the pace of capital investments in distribution sector and strengthen the distribution backbone for absorbing the future growth pattern of electricity consumption both in rural and urban areas without putting additional strain on already stressed balance sheets of DISCOMs. REC is the Nodal Agency for implementation of DDUGJY &Â NEF scheme and is playing a key role in assisting the efforts of Government of India in implementation of UDAY also.

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 supports the funding requirement of the loan component under DDUGJY and IPDS programmes.

âPower for Allâdocument signed by all States reflects the commitment across length and breadth of the country to work towards achieving the very objective, which seemed impossible until recently. PFA document has enabled having projections of all the capital expenditure required by respective States in order to achieve 24x7 power for all, including the Generation (Conventional / Non-Conventional), Transmission, Distribution etc. and has thus brought forth the efforts required to achieve the same.

Your Company has been instrumental in development of âPower for Allâweb-portal and is engaged in assisting Ministry of Power (MoP) in this endeavor. Your Company is also supporting these efforts by partnering with respective State Utilities in terms of making available requisite financing as well as working with Central Government &Â State Governments to resolve issues, if any, for achievement of the objective.

MoP has devised Integrated Rating System for all the State DISCOMs in the country which facilitates realistic assessment of performance based on key defining parameters. The rating methodology enables the DISCOMs analyze their strengths &Â weaknesses and facilitate a focused approach for improving upon their operational and financial performance. It also aids in adoption of consistent approach by Banks/FIs while considering funding proposals of Distribution Companies.

The introduction of Information &Â Communication Technology (ICT) in Power Distribution sector shall enable the power system to become âSMARTâ &Â Near-real-time information would 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, etc. MoP is also working towards ensuring technological interventions through introduction of Smart Grid and has already extended financial assistance to several pilot projects. 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 Pilot projects cover - Power Quality Management (PQM), providing Advanced Metering Infrastructure (AMI), Outage Management (OM), Peak Load Management (PLM) and also DG (Distributed Generation) &Â Micro Grid functionalities. Various Projects have been undertaken for installation of smart meters in different cities under the National Smart Grid Mission (NSGM). Consumers equipped with smart and updated information would be able to manage their consumption pattern according to their requirement. On the other hand, meters having feature of real time communication with the Data Centre, would add to revenue as the power used earlier as theft would not go unnoticed. Further, utilities would be able to map the individual consumers data based on important parameters viz. time of the day, quality and quantum of consumption, nature of Load, Seasonal load pattern etc. for better Demand side management. The initiative would aid in moving towards a Smarter Grid.

These projects are under various stages of implementation in the country. The Government of India is promoting development of 100 smart cities, which shall further throw new financing opportunities in further adoption of technology and best practices in the Distribution segment.

The two pronged mission of Government of India of facilitating power to all and improving operational &Â financial performance of the utilities have already started showing results in terms of timely notification of tariffs by Regulator in many States, filing of MYT petitions, claiming of Return on Equity in the ARR, release of revenue subsidy by State Government, etc.

6.2 Ujwal DISCOM Assurance Yojana

Financially stressed DISCOMs were incapable of supplying adequate power at affordable rates, which has for long hampered the quality of life, overall economic growth and development in the country. Efforts towards 100% village electrification and then 100% household electrification, 24x7 power supply and clean energy cannot be achieved without undertaking adequate capacity building of DISCOMs. Moreover, the issues of frequent power outages need earnest resolution for meeting national priorities like âMake in Indiaâ and âDigital Indiaâ. Unresolved legacy issues with DISCOMs have however kept them trapped in vicious cycle with operational losses being funded by debt. Outstanding debt of DISCOMs had increased from about Rs.2.4 lakh crore at the end of 2011-12 to about Rs.4.3 lakh crore in 2014-15. To ensure permanent resolution of all these long standing as well as potential future issues, the highly ambitious initiative of Ministry of Power, Government of India through Ujwal DISCOM Assurance Yojana (UDAY), launched in November 2015, is a path breaking reform for realizing the Honâble Prime Ministerâs vision of affordable and accessible 24x7 power for all.

UDAY scheme empowers DISCOMs with the opportunity to break even in the next 2-3 years, through initiatives viz.

(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. This 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 improved domestic fuel supply situation, to significant growth in generation capacity, to substantial improvement in transmission capacity/reliability and consumption.

The programme has already witnessed significant traction from various State Governments/DISCOMs and 32 States/UTs are now part of UDAY fold, with 16 States (Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh, Punjab, Bihar, Haryana, Jammu &Â Kashmir, Andhra Pradesh, Madhya Pradesh, Maharashtra, Himachal Pradesh, Telangana, Assam, Tamil Nadu &Â Meghalaya) joining for comprehensive improvement and another 11 States &Â 5 UTs joining for operational turnaround. UDAY scheme is showing encouraging results as liabilities of DISCOMs of Rs.2.09 Lakh crore have been taken over by respective State Governments and additionally Rs.0.24 Lakh crore have been restructured/re-priced through issuance of bonds; thus cleaning the balance sheets of DISCOMs and enabling them to restart the capital expenditure cycle while also enabling financially viable operations of all power sector stakeholders i.e. DISCOMs, TRANSCOs, GENCOs, IPPs, Banks / FIs etc.

Your Company has been instrumental in development of UDAY Web Portal (www.uday.gov.in) and UDAY Mobile App, which is a key enabler in achieving the major objectives outlined under the programme. Through Web Portal / Mobile App, all the details with respect to performance of DISCOMs are readily available vis-a-vis the planned trajectory under the scheme. Accordingly, any deviations in the performance get suitably highlighted for all stakeholders, thus enabling DISCOMs to take corrective actions and others to appropriately access their condition. Also, earlier the information about performance of DISCOMs used to be very outdated and with UDAY Web Portal &Â Mobile App now, the performance of latest quarter is available largely within a gap of 1 to 3 months.

UDAY, by encompassing all the key initiatives required to turnaround the sector, is a programme not just for strengthening of DISCOMs, but is keenly handling most of the current as well as impending issues of the entire power sector, by providing a central platform to participating States for taking up any and all of their concerns / issues with relevant stakeholders. Further, UDAY has undertaken to resolve coal rationalization issues &Â efficiency improvement of conventional generation segment through NTPC handholding etc., ensuring better RPO compliance to promote non-conventional generation and loss reduction of transmission segment as well. Your Company is assisting the Government of India to liaison with respective State Governments / Utilities to enable achievement of all the objectives envisaged under the programme.

With UDAY implementation, various participating States have in general witnessed the reduction in interest costs, power purchase costs and improvement in operational efficiencies, which has led to significant reduction in their AT&C losses and ACS-ARR gap as compared to their last year performance, thus enabling huge amount of savings on this account. It is expected that in upcoming years, the results of the initiative shall become more pronounced.

6.3 Â Â Â National Electricity Fund

REC is Nodal Agency for National Electricity Fund (NEF) - this is an 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 2 financial years viz. 2012-13 and 2013-14. Ministry of Power, Government of India provide interest subsidy on loans disbursed to the State Power Utilities, Distribution Companies both in public and private sector, to improve the infrastructure in Distribution 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. During the financial year 2012-13 &Â 2013-14, NEF Steering Committee has already approved projects of Rs.25,000 crore to 25 DISCOMs in 15 States for taking benefits under NEF. The utilities from the states of Andhra Pradesh, Gujarat, Haryana, Karnataka, Madhya Pradesh, Punjab, Rajasthan, Telangana, Uttarakhand and West Bengal have already benefitted from the interest subsidy of Rs.84.92 crore, approved under the scheme, till March 31, 2018.

6.4 Â Â Â Urja Mitra

Urja Mitra is a distribution sector initiative of Ministry of Power, Government of India, being implemented through your Companyâs subsidiary i.e. RECTPCL. Urja Mitra is first of its kind application which provides a central platform (web-portal www.uriamitra.com as well as mobile app) for State Power Distribution utilities to disseminate Power Outage information to urban/rural power consumers across India through SMS/email/push notifications. Power Consumers across the nation shall have prior intimation of expected duration and cause of scheduled power outages and post fault intimation of unscheduled power outages duration. It also provides a platform to view real time power outages in any part of the country, lodge a complaint on power outages etc. Stakeholder connect is ensured by providing for vernacular mobile apps, which can be used by field staff to trigger power outage information/view ongoing outages/ take corrective action on outage complaints, etc.

As on June 30, 2018, data of around 16.30 crore Rural/Urban/Mixed feeder consumers of 51 DISCOMs already linked on web portal and application live in 46 DISCOMs with consumer base of approximately 14.10 crore. Further, 53.97 crore power outage SMS were sent to the consumers by June 30, 2018.

6.5 Â Â Â 11 kV Rural Feeder Monitoring Scheme

11kV Rural Feeder Monitoring is a distribution sector initiative of Ministry of Power, Government of India, being implemented through your Companyâs subsidiary i.e. RECTPCL. To get complete picture of the entire distribution network in the country and to ensure achievement of Rs.24x7 Power for Allâ, it has been felt essential to capture real time supply parameters of rural India and this can be achieved by monitoring the availability/quality of power supply in rural areas of the country by capturing actual distribution parameters i.e. Power supply, outages and conducting feeder wise Energy audit and AT&C losses calculation. In order to meet this objective, Rs.11kV Rural Feeder Monitoring Schemeâhas been introduced. Under the scheme, rural feeders meter data shall be acquired through modem and shall be sent to National Power Portal (NPP) to make it available for use of all stakeholders. This scheme targets to develop a self-sustained independent web based automated system for approx.

1.2 Lakh rural and agricultural feeders across the country by acquiring various essential parameters of all the outgoing 11kV rural feeders &Â such 66/33 kV incoming feeders from where 11kV rural feeders are emanating and making the information available online for all on public portal on real time basis, for power supply monitoring, alerts, meter data analysis, information dissemination and energy audit.

The system would help in monitoring power supply, proper planning, decision support and taking corrective actions on the business activities in addition to transparently disseminating power supply status. It would further facilitate consolidation of various parameters downloaded from the meters installed on the feeders into a common database thus enabling generation of various MIS reports for analysis and action. As on June 30, 2018, almost 53,000 Nos. of Modems in different DISCOMs have been installed. This is in addition to the already integrated 29,000 Nos. of Rural Feeders to National Power Portal.

6.6 TARANG

TARANG is a transmission sector initiative for its better monitoring, being run under guidance from Ministry of Power through your companyâs subsidiary i.e. RECTPCL, which has developed âTARANGâ- Transmission App for Real-Time Monitoring &Â Growth. TARANG is an informative medium to provide information regarding Pan-India progress of Transmission System which can be drilled down to month wise, agency wise, state wise, etc. The details of stalled/delayed projects is separately provided with reasons of delay so that all concerned stakeholders can take a corrective decision in time to drive benefits from the timely completion of the projects. TARANG monitors the progress of transmission system in the country, both Intra State and Inter State Transmission Projects through Tariff Based Competitive Bidding (TBCB) as well as Regulated Tariff Mechanism.

TARANG also shows the prospective upcoming Intra-State as well as Inter-State Projects along with NITs being floated by different Transmission Utilities Pan-India. Tarang provides advance information of upcoming transmission projects approved by Empowered Committee on Transmission helping bidders to gear up future transmission projects.

7. FINANCING ACTIVITIES

Your Company has been providing funding assistance for power generation, transmission &Â distribution projects including for the electrification of villages. Details of major financing activities during the financial year 2017-18 are as under:

7.1 Generation

During the financial year 2017-18, your Company sanctioned 83 Nos. of Generation/R&M loans including 6 Nos. of additional loan assistance with total financial outlay of Rs.53,223.55 crore including consortium financing with other financial institutions, as details mentioned below:

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (Rs.in crore)

Particulars	No. of Loans	Loan Amount
State Sector	Â	Â
Fresh Loan	77	45,334.28
Additional Loan	6	7,242.28
Private Sector	Â	Â
Additional loan	0	646.99
Total	83	53,223.55

7.2 Renewable Energy

During the year, REC sanctioned loan assistance of Rs.7,034.24 crore to 28 Renewable Energy projects with installed generation capacity aggregating 704 MW, out of which 17 are new grid connected projects, 4 projects are under micro grid under decentralized distributed generation projects, 1 solar pump set project and 6 projects for meeting renewable purchase obligations to state DISCOMs.

Out of new 17 grid connected projects, 7 solar photo-voltaic projects aggregating 235 MW, 3 SHP Project of 64 MW, 2 Wind projects of 352 MW and 5 Bagasse/Municipal Solid Waste to Energy projects of 53 MW have been sanctioned. The total cost of all the projects sanctioned during 2017-18 aggregates to Rs.9,453.42 crore. The sanctions and disbursement under renewable energy category recorded a growth over 300% vis-a-vis the previous year.

The disbursement achieved during the year was Rs.5,403.27 crore as detailed below:

Particulars	Unit	FY 2017-18	FY 2016-17
Projects Sanctioned	Nos.	28	16
Capacity of Sanctioned Projects	MW	704	367
Cost of Projects	âin crore	9,453.42	3,035.53
Loan Sanctioned		7,034.24	2,089.77
Loan Disbursed		5,403.27	1,617.68

7.3 Transmission &Â Distribution

Your Company continued to play an active role in the 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 Indiaâs 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 existing distribution system through new technologies.

During the financial year 2017-18, your Company sanctioned 734 Nos. of Transmission and Distribution schemes involving a total loan assistance of Rs.36,326.27 crore. This includes primary power evacuation schemes associated with generating plants, system improvement schemes, schemes for Procurement &Â Installation of equipment/materials like meters, transformers, conductors, tower material, cables, etc. Government approved schemes like DDUGJY &Â IPDS schemes and Infrastructure schemes for providing electricity access to various categories of consumers including Agriculture.

7.4 Â Â Â Short / Medium Term Loans and other Loan assistance

During the financial year 2017-18, your Company has also sanctioned 50 loan assistance of Rs.10,950 crore to various power utilities, in the form of short / medium term loans &Â other loan assistance, to meet their funds requirement of short/ medium term &Â working capital, etc.

7.5 Â Â Â Financing Activities in North Eastern States

During the financial year 2017-18, a total sum of Rs.368.01 crore was sanctioned and an amount of Rs.378.42 crore was disbursed against the various projects relating to Transmission &Â Distribution, Generation including Renewable projects, etc., in North Eastern states, as detailed in the attached tables.

7.6 Â Â Â Appraisal System for financing Private Sector Projects

REC has its own guidelines for appraisal of Private Sector Conventional &Â Renewable Power Generation Projects. The appraisal is carried out on the basis of the financial performance, creditworthiness, management proficiency &Â sectoral experience of the promoter entities. RECâs interest rates &Â security structure are linked to the grades assigned to the private sector projects.

7.7 Â Â Â Grading of State Power Utilities

The Company has well defined policy/guidelines for grading of State Power Utilities. The guidelines for grading of State Power Utilities (Generation/Transmission and Trading Utilities) are reviewed periodically in view of significant changes in the power sector. During the year, the State Grading Guidelines were reviewed and modified incorporating suitable parameters in line with the changing scenario.

For the purpose of funding, the Company has classified State Power Generation and Transmission utilities into A++, A+, B and C categories. The categorization (bi-annually) of State Power Generation and Transmission utilities is arrived based on the evaluation of utilityâs performance against specific parameters covering operational &Â financial performance including regulatory environment, Audited Financial Statements, etc. With regard to State Power Distribution utilities (including SEBs/ utilities with integrated operations), the Company adopts Ministry of Powerâs Integrated Ratings by aligning such ratings/ grading with REC standard categories of A+, A, B and C. The categorization enables your Company to determine credit exposure limits and interest rates to the state power utilities.

7.8 Investments made during the financial year 2017-18

The Company has subscribed to 3,47,429 fully paid equity shares of Housing &Â Urban Development Corporation Limited (HUDCO) under Initial Public Offer at a cost of Rs.60/- per equity share of face value of Rs.10/- each, with aggregate investment amounting to Rs.2.08 crore in May, 2017.

8. Â Â Â INTERNATIONAL COOPERATION &Â DEVELOPMENT

REC has three lines of ODA credit with KfW, Germany. All of them have been fully drawn as on March 31, 2018. KfW-I and KfW-II ODA loan are of EUR 70 million each (approx. Rs.454.02 crore &Â Rs.480.97 crore, respectively) and KfW-III is of EUR 100 million (approx. Rs.753.73 crore). Apart from above, REC has two lines of ODA credit with JICA, Japan. Both of them have also been fully drawn. Under JICA-I &Â II ODA loans, cumulative amount 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, 2018.

9. Â Â Â DEENDAYAL UPADHYAYA GRAM JYOTI YOJANA

Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) is the flagship scheme of Government of India 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 upto 15% (5% for special States) on achievement of prescribed milestones and all unelectrified villages/habitations irrespective of population criteria are covered for electrification in accordance with the guidelines of the Scheme. All erstwhile RE schemes have been subsumed in DDUGJY. REC is the Nodal agency for operationalization of DDUGJY.

Further, DDUGJY facilitates towards achievement of Rs.24x7 Power for Allâin the country through the following project components:

a) Â Â Â Separation of agriculture and non-agriculture feeders facilitating continuous quality power supply to non-agricultural consumers and adequate power supply to agricultural consumers in the rural areas;

b) Â Â Â Strengthening and augmentation of sub-transmission &Â distribution infrastructure in rural areas;

c) Â Â Â Micro-grid and Off-grid distribution network;

d) Â Â Â Metering of distribution transformers/feeders/consumers; and

e) Â Â Â Rural Electrification works (including the erstwhile RE projects).

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

9.1 Village Electrification

Indiaâs rural electrification programme passed through several stages of improvement with appropriate intervention at Government of India level. In spite of various programmes of Government of India, as on April 1, 2015; there were 18,452 villages which still remained un-electrified.

In the Independence Day address to the nation on August 15, 2015, Honâble Prime Minister pledged that all remaining Un-Electrified (UE) villages in the country would be electrified within 1,000 days with the help of States and local bodies. Accordingly, Ministry of Power had fast tracked electrification of all 18,452 villages on priority mode. As these remaining un-electrified villages are located in inaccessible areas (thickly forested, mountainous regions, etc.) involving tough terrain, inclement weather, areas facing Right of Way (RoW) issues, areas plagued by insurgency and Leftwing extremism, intensive monitoring mechanism strategized to get regular progress of each village. Towards this direction, entire process of village electrification was categorized into 12 milestones. Electrical engineers viz., âGram Vidyut Abhiyantas (GVAs)âwere deployed at Block/District level in order to shoulder this mission at field level. Further, a dedicated web-portal namely âGARV Appâ(www.garv.gov.in), well acknowledged for its transparent and accountable mechanism was developed for meticulous monitoring of the progress of electrification of all un-electrified villages through an online system along with the milestones of village electrification progress.

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 &Â view their respective customized dashboard and also feedback and suggestions from users.

During the course of village electrification process, States reported an additional 1,227 villages as un-electrified. Accordingly, REC made all concerted efforts in facilitation and made available adequate funds for village electrification. To those inaccessible difficult to approach villages, air lifting of material had been resorted through choppers of Indian Air Force to the States of Jammu &Â Kashmir and Arunachal Pradesh. Further, assistance of Railways had been availed for transporting voluminous materials to Arunachal Pradesh. To such remotest areas where neither of the options of sophisticated transportation was available, material were transported through manual head loading for days together.

With the above initiatives and collective efforts of States and other stakeholders, 16,859 villages have been electrified as on March 31, 2018. Further, April 28, 2018 had been made as a historic day in the Power Sector by achieving electrification of all un-electrified census inhabited villages in the country totaling to 18,374 villages excluding the 1,305 uninhabited villages.

9.2 Â Â Â Performance during financial year 2017-18:

a. Â Â Â Sanction:

Under DDUGJY, Decentralized Distributed Generation (DDG) projects have also been sanctioned, for providing electricity access to the un-electrified villages/habitations where grid connectivity is neither technically feasible nor cost effective. During the financial year, an amount of Rs.17.05 crore (including capital subsidy of Rs.15.34 crore) was sanctioned for Manipur state.

b. Â Â Â Fund release:

The subsidy of Government of India is channelized through REC and the matching contribution is infused by the respective State Govt. /Implementing Agencies through Loan or their own sources.

Under the scheme, grant/subsidy of Rs.9,028.09 crore (including Rs.262.60 crore under DDG) provided by Government of India and a loan of Rs.687.58 crore, was disbursed to the States/Implementing Agencies, by the Company, during the financial year 2017-18.

c. Â Â Â Progress of electrification:

During the financial year, under DDUGJY, 3,736 un-electrified villages have been electrified and free electricity connections to 50.42 Lakh BPL households have been provided. Further, segregation of feeders and new 11 kV lines totaling to 1,01,054 Kms have been laid and 1,571 sub-stations (New &Â Augmentation) have been commissioned.

The State-wise details of sanctions, fund releases &Â progress of electrification during the financial year are given in Table- 5.

9.3 Â Â Â Cumulative Performance upto March 31, 2018:

Under DDUGJY, cumulatively up to March 31, 2018; 6,287 projects for Rs.1,08,496.85 crore have been sanctioned and a sum of Rs.59,075.87 crore (including Government of India grant of Rs.54,150.55 crore) have been disbursed to the Implementing agencies.

As regards physical progress, cumulatively upto March 31, 2018, 1,25,895 un-electrified villages have been electrified and free electricity connections to 305.10 Lakh BPL households have been provided. Further, 3,063 Sub-stations (including 1,979 Augmentation Sub-stations) have been commissioned and 21,811 cKm of 11 KV feeders have been segregated.

The State-wise details of cumulative sanction, fund release &Â achievements are furnished at Table- 6.

9.4 Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA)

Honâble Prime Minister launched Pradhan Mantri Sahaj Bijli Har Ghar Yojana - Saubhagya on September 25, 2017 to achieve Universal Household electrification in the country through electrification of all households in both rural and urban areas. Ministry of Power designated REC as the Nodal agency for operationalization of Saubhagya Scheme as well.

The capital outlay of Saubhagya Scheme is Rs.16,320 crore including Gross Budgetary Support of Rs.12,320 crore. Estimated 3.5 crore households in the country are targeted for electrification through creation access and last mile connectivity in rural and urban areas. Wherever Grid connectivity is technically not feasible and financially unviable, electrification is resorted through Solar based off-grid systems.

Major Initiatives taken by REC for successful completion of Saubhagya Schemes are as under:

- Â Â Â Guidelines issued to all States/Power Utilities;

- Â Â Â Dedicated Saubhagya web-portal developed for monitoring;

- Â Â Â Gram Vidyut Abhiyantas (GVAs) have been deployed across the districts in States where major un-electrified households remain;

- Â Â Â As on March 31, 2018, Government subsidy of Rs.1,540.63 crore released to States;

- Â Â Â Nodal Officers at State level have been nominated; and

- Â Â Â States have been asked to upload DPRs in web-portal and to freeze the un-electrified Household figures.

With the active support and cooperation of States/Power Utilities and other stakeholders, 40.45 Lakh households were electrified upto March 31, 2018, which have crossed the figure of 1.00 crore on August 5, 2018. Under the scheme, grant/ subsidy of Rs.1,540.63 crore provided by Government of India, was disbursed to the States/Implementing Agencies, by the Company, during the financial year 2017-18. The State-wise details of households electrified and subsidy disbursed under Saubhagya during the financial year 2017-18 are furnished at Table-7.

10. Â Â Â STANDARDIZATION, QUALITY CONTROL &Â 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 &Â XII five-year plan schemes, REC Quality Monitors (RQM) 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. During the financial year 2017-18, RQMs have undertaken inspection of 75 villages under XI Plan Phase-I projects; 2,033 villages under XI Plan Phase-II projects and 9,194 villages under XII Plan Projects. Further, 405 Nos. of material inspections were carried out in XII Plan projects at manufacturer premises for ensuring quality of materials.

REC Quality Monitors (RQM) for DDUGJY New Projects were also appointed. During the financial year 2017-18, 1,229 Nos. of material inspections were carried out by RQMs under DDUGJY new projects at manufacturer premises for ensuring quality of materials.

11. Â Â Â RISK MANAGEMENT

As a Lending entity, the Company is exposed to various risks such as credit risk, operational risk, market risk, interest rate risk, liquidity risk and foreign currency risk. The Company is conscious of such risks and has put in place a comprehensive Risk Management Policy to address the same.

11.1 Risk Management Committee

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 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) Â Â Â 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. Further, on regular basis, the project risks and are reviewed and categorized as High/ Moderate/Low on the basis of different risk parameters and exposure of the project as per Project Risk categorization frameworks.

(ii) Â Â Â Operational Risk:

The operational risk arises from inadequate or failed internal processes, people and systems or external events. The Company has an Organization-wide risk categorization framework through which all the operational risks are measured and categorized as High/ Moderate/ Low. Further the operational Risks of the Company are studied in eight functional areas such as Business, Compliance, Finance, Human Resource, Information Technology, Legal, Operational and Strategic.

(iii) Â Â Â Market Risk:

Market Risk comprises the Interest Rate Risk, Liquidity Risk and Foreign Currency Risk which is dealt by Asset Liability Management Policy and Hedging Policy.

11.2 ALCO Committee

To manage the market risks, 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 interest rates, liquidity and currency rates. The brief description of the risks is as below:

(i) Â Â Â Interest Rate Risk:

Interest rate risk is the potential loss arising from fluctuations in market interest rates. In order to mitigate the interest rate risk, Company periodically review its lending rates and the weighted average cost of borrowing based on prevailing market rates.

(ii) Â Â Â Liquidity Risk:

Liquidity risk is the risk of potential inability to meet 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 forward-looking resource mobilization based on projected disbursements and maturing obligations.

(iii) Â Â Â 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.

12. PREFERRED CUSTOMER POLICY

As a part of business promotion strategy, a Preferred Customer Policy was formulated with the basic purpose of offering an enhanced level of services to the Companyâs 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 REC-IPMAT, Hyderabad.

13. Â Â Â INFORMATION TECHNOLOGY INITIATIVES

(i) Â Â Â Implementation of latest version of Business ERP: ERP is in place since July, 2009. REC has now initiated a process of migration of existing e-Business ERP (Oracle e-Biz suite) 11i (launched on July, 24 2009) to the latest version R12.2.7 and replacement of ERP hardware. The new ERP system will have:

- Â Â Â Advanced features which will further facilitate automation of business operation of the Company;

- Â Â Â Integration to other systems like e-Office, etc; and

- Â Â Â GST and Ind-AS compliant.

Live operations in new upgraded version of Business ERP started since July, 2018.

(ii) Â Â Â Implementation of e-Office across all Offices: Digital office solution has been implemented across all offices of the Company w.e.f. January, 2018. Training has been imparted to all users across all offices of the Company. As a continuous improvement, several additional features have been incorporated.

(iii) Â Â Â Up-gradation of REC WAN Network with enhanced Bandwidth: Organization wide MPLS VPN network infrastructure (operational since 2008) along with Video Conferencing facility has been completely revamped with latest network devices, enhancement of Bandwidth, high availability features, etc., to meet the demanding requirement of operation.

(iv) Â Â Â Implementation of IT Framework as per RBI Master Direction: REC has initiated steps to comply with Master Direction of IT Framework issued by RBI for NBFC sector. This activity is completed and now REC is compliant with IT framework as per RBI Master Directions since May, 2018.

(v) Â Â Â Development of GST module and integration with Business ERP: With the new tax regime of GST, REC is GST compliant and integrated with GSP solution as per statutory requirement.

(vi) Â Â Â Development of REC Corporate Intranet / Internet Website: REC Corporate Website &Â Intranet portal have been completely revamped to make it user friendly, interactive, dynamic &Â informative and accessible from mobile devices from public network in secured environment.

(vii) Â Â Â Migration of entire existing REC network from IPv4 to IPv6: As per directive of Government of India (Ministry of Information Technology), REC has become IPv6 compliant in September, 2017. This activity has been completed and reported to the Ministry of Power.

(viii) Â Â Â Primary Data Centre (PDC) and Disaster Recovery Center (DRC): Both PDC and DRC of REC are ISO/IEC 27001:2013 certified and also comply to National Cyber Security Policy of Government of India. REC has also implemented Data Leakage &Â Prevention (DLP) system at DC &Â DR for preventing sharing of confidential and critical information outside the corporate network

(ix) Â Â Â Promoting Government of India initiatives: REC facilitates and promotes the IT initiatives of Government of India like My Gov, e-Governance, DPE guidelines on digital mode of payments etc., within the Company.

(x) Â Â Â Providing training and computing facility to Employees: Computer to Employee population ratio is 100%. IT Division also organizes and impart various training programmes on IT &Â IS to upgrade Computer skills of the employees of the Company.

14. Â Â Â REC INSTITUTE OF POWER MANAGEMENT AND TRAINING

REC-Institute of Power Management and Training (REC-IPMAT), earlier known as Central Institute for Rural Electrification was established at Hyderabad in 1979 under the aegis of Rural Electrification Corporation Limited to cater to the training and development needs of engineers and managers of Power Sector organizations. REC-IPMAT has conducted various programmes on the state-of-art subjects of Power Generation, Transmission, Distribution and Renewable energy sources and other related issues/topics.

14.1 National Training Programmes (NTP) under DDUGJY

REC/REC-IPMAT is the Nodal Agency for coordination and implementation of National Training Programmes for employees of C&D category, under DDUGJY, sponsored by Ministry of Power, Government of India. During the year 2017-18, as against the target of 25,000 employees of C&D category, 28,235 were trained. Since starting of the National Training Programmes in 2009, total 2,33,030 employees of C&D category were trained upto March 31, 2018.

REC-IPMAT on the request of power utilities has conducted 103 programmes for the employees of C&D category with 2,566 participants for HPSEBL, JdVVNL, SOUTHCO, JKPDD, TSNPDCL, Lakshadweep Electricity Department (LED), MPPaKVVCL, DVVNL &Â APDCL at various locations under its banner and 3 Nos. of Training of Trainers (ToT) programmes for LED, MPPaKVVCL and MeECL and trained 45 participants.

14.2 Â Â Â International Programmes

REC-IPMAT 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, REC-IPMAT has organized 9 International programmes with 174 participants, on the topics viz. Solar Power Generation - Grid Enabling (4 weeks); Rural Electrification and Power Management (8 weeks); Design, Erection, O&M of EHV Sub-Stations (4 weeks); Planning and Management of Power Transmission and Distribution System (8 weeks); Best Practices in Power Distribution (4 weeks); Management of Power Utilities using IT/ Automated Solutions (5 weeks); Certificate Course in Electric Power Management (12 Weeks) and Latest Trends in Thermal Power Generation (4 weeks).The participants from countries viz. Afghanistan, Bangladesh, Bhutan, Cambodia, Cameroon, Cote dâIvoire, Egypt, Ethiopia, Gambia, Ghana, Guatemala, Haiti, Iran, Iraq, Kenya, Lebanon, Madagascar, Malawi, Mauritius, Nigeria, Oman, Peru, Philippines, Seychelles, South Sudan, Sri Lanka, Sudan, Suriname, Syria, Tanzania, Tunisia, Vietnam and Zimbabwe have attended the programmes.

14.3 Â Â Â Regular National Programmes

REC-IPMAT has organised 25 Regular T raining Programmes for the personnel of various Power Utilities on different topics such as Earthing Practices &Â Safety Measures in Electrical Installations; Power Transformer - Testing, Commissioning, Protection &Â Maintenance; Concept to Commissioning of Solar Power Plants; Latest Trends in O&M of Distribution Transformers; Power Trading &Â Exchange; Operation, Maintenance and Protection aspects of Distribution Sub-stations and Lines; Labour Laws - Workmen Compensation and Contract Labour Act-Procedures in dealing Court cases; Underground Cables - Design, Laying, Monitoring and Fault Detection; Technical Specifications and Construction Standards for Distribution System; Power Purchase Agreement; Gas Insulated Sub-stations; Tariff Policy and Submission of ARRs - Regulatory Compliance; Power System Protection; Open Access, Trading and Availability Based Tariff (ABT); Advanced Technologies in Metering, Billing and Collection; Zero-Breakdown in Power Transformers; Power Factor Improvement and Reactive Power Management; Distribution Loss Reduction - Issues, Challenges and Remedial Measures; Implementation of Goods &Â Service Tax (GST); Ind AS (IFRS) adoption in Power Sector; Competitive Bidding-Economical Procurement; Power Transmission Lines -Design, Construction &Â O&M, and Energy Management &Â Auditing. A total number of 318 participants attended the above programmes.

14.4 Â Â Â IPDS Programmes

REC-IPMAT as partner training institute organized IPDS programmes sponsored by Ministry of Power. During the year, 19 IPDS programmes were conducted for employees of A&B category, on the themes viz. Communication &Â Customer Relations; Efficiency Improvement Measures in Distribution System; Revenue Management &Â Distribution Loss Reduction and Best Practices in Distribution Operation &Â Management System. In total, 351 participants were trained under these programmes.

14.5 Â Â Â Customized Programmes

14 customised programmes were designed and organised, suitable to the utility requirements. The programmes conducted are on âPower Distribution Managementâ for JKPDD at REC-IPMAT campus and for the freshly recruited Junior Engineers of HPSEBL, at Dharamshala, Sundernagar &Â Shimla (8 batches). The programme on âFinance for Non-Finance Executivesâ for MPPTCL at Jabalpur and Safety Programme for MPPKVVCL at Indore. The 3 programmes on âFinance for Non-Finance Executivesâ, âPower Transformer-Testing, Commissioning, Protection &Â Maintenanceâ and âPower Management &Â Energy lossesâ for JBVNL at Ranchi. In total, 383 participants were trained under customized programmes.

14.6 Â Â Â In-house Training Programmes

REC-IPMAT also organised 3 in-house programmes for the employees of REC and 33 employees have taken part in these programmes. The topics covered are Solar Power - Design and Development; Smart Grid &Â Smart Meters and Managing Change in Power Sector for Senior CPMs/ CPMs.

14.7 Â Â Â Solar Energy Programmes

REC-IPMAT has been empanelled by National Institute of Solar Energy (NISE) as partner training institute for conduct of Solar Energy Programmes and organised 13 programmes on âSolar Roof Topâ for Distribution Engineers of MSEDCL at various locations of Maharastra state including one ToT programme at REC-IPMAT Campus, Hyderabad. In total, 504 participants were trained under these programmes.

14.8 In all, during the financial year 2017-18, in addition to coordinating and monitoring the National Training Programmes for employees of C&D category, sponsored by Ministry of Power, Government of India, REC-IPMAT has conducted 189 programmes on various themes/subjects and trained 4,374 personnel with 21,639 man-days of training.

15. Â Â Â 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 Regional/Sub-Offices across the country for claims processing.

16. Â Â Â HUMAN RESOURCE MANAGEMENT

As on March 31, 2018, the Companyâs total manpower was 528 employees, including 414 employees in the executive cadre and 114 employees in the non-executive cadre. The Company gives utmost importance to the capacity-building and well-being of its employees. During the year under review, the Company sponsored 190 of its employees to various training programmes/workshops within the country and abroad. The Industrial Relations continued to be on a cordial note in the Company. During the year, there was no loss of man-days on account of industrial unrest. Further, there are regular interactions and open-house sessions between the management and the employees, which helps in building an atmosphere of trust and cooperation, thereby leading to a motivated work force and consistent growth in organizational performance.

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, 2018 are given below:

Group	Number of Employees
Â	Total		SC		ST
Â	FY 2017-18	FY 2016-17	FY 2017-18	FY 2016-17	FY 2017-18	FY 2016-17
A	363	377	35	36	13	14
B	87	84	15	12	2	2
C	16	35	1	6	0	0
D	62	70	17	21	1	2
Total	528	566	68	75	16	18

16.2 Training &Â Human Resource Development

As a measure of capacity building including overall development of employees 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 at sharpening business skills and competencies 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 190 employees to various training programmes, workshops etc., within the country and abroad. In addition, four training programmes were conducted in-house which were attended by 71 employees. Taken together, these initiatives enabled the Company to achieve 723 training man days. Further, 17 Executives were deputed for programmes in countries like Germany, France, Japan, Morocco, Malaysia, Norway, USA, etc.

16.3 Â Â Â 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 three hospitals. Further, part time services of four specialized doctors were engaged to provide onsite medical facilities to employees. The Company has also been funding sports &Â recreation equipment for use by employees and promote well- being of employees.

Sports Activities

During the financial year 2017-18, REC hosted an Inter-CPSU Cricket Tournament at New Delhi and also sponsored its employees for various Inter-CPSU sports tournaments such as Badminton, Table Tennis, Volley Ball, Kabaddi, 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 simulation competitions conducted by reputed institutions.

16.4 Â Â Â Representation of Women Employees

As on March 31, 2018, the Company had 89 permanent women employees, which represent 16.86% of the total work force. There is no discrimination of employees on the basis of caste, creed and religion, etc. A Women Cell has been in operation in the Company to look after welfare and all round development of women employees. International Womenâs Day was celebrated by REC Womenâs Cell.

16.5 Â Â Â Industrial Relations

The Industrial Relations scenario in the Company continued to be cordial and harmonious in the financial year 2017-18. 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 employee welfare. This has helped to build an atmosphere of trust and cooperation resulting in a motivated workforce and continued improvement in business performance. In compliance with the provisions of âThe Rights of Persons with Disabilities Act, 2016â, Company has appointed the Executive Director (Admin. &Â Estate) as the Grievance Redressal Officer for the Persons with Disabilities (PwD).

16.6 Â Â Â Public Grievance Redressal Machinery

A Public Grievance Cell has been set up in REC for the purpose of redressing the grievances from the public in a time bound manner. The cell handles Centralized Public Grievance Redress and Monitoring System (CPGRAMS) portal which is a platform for the citizens for lodging their grievances. The CPGRAMS portal is developed and maintained by the Department of Administrative Reforms &Â Public Grievances (DARPG), Government of India.

Further, in compliance of RBI Guidelines, the Company has put in place a Grievance Redressal mechanism to resolve disputes between the company and its customers and appointed a senior official as the Grievance Redressal Officer. Further, 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 &Â SUSTAINABLE DEVELOPMENT

The Company has its âCorporate Social Responsibility &Â Sustainability Policyâaligned with the amended provisions of Companies Act, 2013, 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. The copy of the âREC Corporate Social Responsibility &Â Sustainability Policyâis available on the website of the Company.

During the financial year 2017-18, the Corporate Social Responsibility and Sustainable Development (CSR &Â SD) initiatives of the Company were continued with a view to integrate RECâs business operations with social processes while recognizing the interests of its stakeholders. CSR &Â SD projects were linked with the principle of sustainable development. The strategic focus was aimed at CSR &Â SD initiative towards fulfilling the National Plan goals and objectives including Sustainable 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 programme, education, environmental sustainability, health care including for old age and persons with disabilities, drinking water and sanitation facilities, etc. The CSR strategy has been developed with action plan in project-based accountability approach. The CSR activities have been implemented in projectmode, with baseline survey, specified time-frame, identified milestones, periodic monitoring and impact assessment. Disbursement of allocated funds under CSR was linked with achievement of the milestones and deliverables. During the financial year 2017-18, financial assistance aggregating to Rs.167.24 crore was sanctioned for various projects under Corporate Social Responsibility and Rs.49.45 crore was disbursed. A detailed Report on Corporate Social Responsibility and Sustainability Activities is annexed to this Report.

18. Â Â Â VIGILANCE ACTIVITIES

REC constantly endeavors to optimize probity and integrity among employees and to promote transparency, fairness and accountability in all operational areas. Vigilance Division mainly aims at âPreventive Vigilanceâ by reviewing of policies, rotation/transfers of employees holding sensitive posts, review of Audit Reports, review of projects/tenders/contracts awarded, inspections of Regional Offices/State Offices, review of Annual Property Returns (APRs), etc. Streamlining of systems and procedures in matters relating to administrative, financial and human resources 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. are online as well as invigorated online vigilance clearance system. Further, it was ensured that information/policies like tenders, requisite forms, status of loan applications/third party payments, Fair Practices Code, Policy for Prevention of Fraud, CSR guidelines, Whistle Blower Policy, etc. are available on the website of the Company.

With effect from April, 2016, almost all tenders above Rs.2 lakh were processed through E-Procurement mode and E-Reverse Auction has also started in cases where estimated value of procurement is more than Rs.1 crore and lowest quoted price are more than 20% of estimated value. Regular/surprise inspections of field offices were carried out and employees were sensitized about the importance of Vigilance. Regular review meetings were taken up with operating Divisions on the existing systems and procedures to make these more transparent and accountable. Agreed List and List of Officers of Doubtful Integrity were finalized. Prescribed periodical statistical returns were also being sent to Central Vigilance Commission (CVC) and MoP on time.

Vigilance Awareness Week was observed from October 30, 2017 to November 4, 2017, where all employees were sensitized to ensure that RECâs CDA rules are followed scrupulously and highest standard of ethics and integrity are maintained by everyone at all times. During the week, REC has administered Integrity Pledge, conducted Just a Minute, Essay Writing, Painting and Slogan Writing Competitions for employees and their family members and organized one day workshop on âFinancial Frauds: Investigation, Controls and Risk Management Strategyâ. Banners/standees/posters were displayed at different locations of all offices of the Company across country as well as various schools and colleges. Inter-College Debate Competition was organized wherein 39 colleges have participated and Inter-School Debate Competition was organized among 18 Schools. Apart from these, all India level Inter School Poster Competition has also been organized. Further, REC has setup Integrity Clubs in 25 schools all over India, the first of its kind in India, to encourage children to collectively participate in fight against corruption.

The performance of Vigilance Division was reviewed periodically by CVC, Board of Directors and CMD, in addition to regular reviews undertaken by the CVO in accordance with the prescribed norms.

19. Â Â Â IMPLEMENTATION OF OFFICIAL LANGUAGE

In compliance with the Official Language Act, 1963, Official Language Rules, 1976 and orders issued by the Government of India from time to time, efforts were continued during the year for increasing the progressive use of Hindi in official work. To ensure the implementation of Official Language effectively and to review the progress of implementation of the Official Language policy, Committees(s) are constituted in all offices. The Committees chalks out strategies to implement the constitutional provisions of the Official Language Policy of the Union with a view to achieve the targets prescribed in the Annual Programme issued by the Department of Official Language, Ministry of Home Affairs.

During the year, Hindi fortnight was organized in Corporate Office from September 1, 2017 to September 15, 2017, under which various competitions/activities like Hindi debate competition on the topic âVision New India: Challenges and opportunitiesâand âIndia Business Quizâwere organized. The participation of employees in all the events/competitions was encouraging and cash prizes were also awarded to winners in different categories to encourage larger participation and to motivate employees to increase use of Hindi in their day to day working.

Further, to give hands-on exposure to participants in various facets of use of Hindi in discharge of their official duties and to impart practical knowledge about the Official Language Policy and related subjects, Hindi workshops were organised where a number of Executives/Non-Executives participated.

Inspections of different divisions and ROs/SOs were carried out by REC Rajbhasha Division to assess the progressive use of Hindi in official work. A team of officials of Ministry of Power also reviewed the status of Official Language implementation in REC Corporate Office.

Rajbhasha Division has come out with two editions (Half yearly) of In-house Hindi Journal âUrjayanâcontaining interesting and useful articles as well as literary writings of the employees. In order to motivate Hindi write ups, articles, poems, etc. for the magazine, the Company has a policy to award cash incentives to the participants.

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

20.1 Â Â Â Conservation of Energy

There are no significant particulars, relating to conservation of energy and technology absorption as your Company does not own any manufacturing facility. Further, the Registered Office of the Company is located at âSCOPE Complexâwhere all civil, electrical installation &Â maintenance is carried out by SCOPE. Effective monitoring, controlling &Â scheduling the operation of AC chilling units, elevators &Â by putting other energy efficient equipments, replacement of conventional light fittings, CFL, etc. with LED light fittings and maintaining power factor nearest to unity, SCOPE has saved around 10.31 lakh units consumption during the financial year 2017-18, resulting saving in terms of amount of around Rs.1.10 crore.

20.2 Â Â Â Foreign Exchange Earnings &Â Outgo

During the financial year 2017-18, an interest income of Rs.0.16 crore was earned on unutilised foreign currency. Further, the foreign exchange outflow aggregating Rs.553.87 crore was made during the financial year on account of foreign travelling, training expenses, interest, principal repayment, finance charges and other expenses.

21. Â Â Â SUBSIDIARY COMPANIES

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

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

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

In order to initiate development of each independent Interstate and Intrastate transmission project allocated by Ministry of Power, Government of India and State Governments, RECTPCL incorporates Project specific Special Purpose Vehicle (SPV) as Wholly Owned Subsidiary Company and after selection of successful bidder through a two stage Bidding process featuring separate Request for Qualification (RfQ) and Request for Proposal (RfP) in accordance with Tariff Based Competitive Bidding guidelines for transmission projects as notified by Ministry of Power, Government of India, the respective Project Specific SPV along with its all assets and liabilities is transferred to the selected bidder.

21.1 REC Power Distribution Company Limited

During the financial year 2017-18, the performance of RECPDCL has been consistent in its core business viz. Preparation of Detailed Project Reports (DPR), Third Party Inspection (TPI), Material Inspection &Â Project Management Consultancy (PMC) and Project Management Agency/Project Management Consultant under DDUGJY and IPDS.

At the end of the financial year 2017-18, RECPDCL has been working on about 80 on-going projects with project cost of Rs.83,237 crore and expected consultancy fee of Rs.1,032 crore, for 43 Nos. of DISCOMs/RE Cooperative Societies and other agencies/Government bodies, spread in 27 States and 4 Union Territories.

Major assignments/on-going projects

The major assignments/on-going projects undertaken by RECPDCL during the financial year 2017-18 includes -

(i) Â Â Â PMA/PMC work under DDUGJY and IPDS for the 25 DISCOMs and 5 Co-Operative Societies in 16 States on Pan India basis;

(ii) Â Â Â PIA work in J&K region under IPDS/R-APDRP Part-B/PMDP scheme for urban electrification works and also as PMA for Urban and Rural Electrification works under DDUGJY/PMDP schemes;

(iii) Â Â Â PMC &Â AMC work of EESL LED street light project in Chandigarh, Chhattisgarh, Punjab &Â Jharkhand and AMC work of EESL LED street light project in Rajasthan &Â Tripura;

(iv) Â Â Â Preparation of DPRs under 24x7 Power for All &Â Survey in 4 DISCOMs of Uttar Pradesh covering all 75 districts;

(v) Â Â Â PMA for designing of Power Management Software tool for Haryana Power Purchase Center and to provide Operation Support for a period of 3 years after Go-Live of software and PMA works for turnkey execution of deposit work of 66kV line for Chandigarh Electricity Department;

(vi) Â Â Â PIA work for turnkey execution of AMI and SCADA for Smart Grid Pilot Project in Chandigarh for Chandigarh Electricity Department (CED);

(vii) Â Â Â Management &Â Technical Consultancy Services for all 5 DISCOMs of Uttar Pradesh for conducting Energy Audit of all feeders of UPPCL;

(viii) Â Â Â Preparation of Cost Data Book and Asset verification of Capex of 2 DISCOMs (BRPL &Â BYPL) for Delhi Electricity Regulatory Commission (DERC); and

(ix) Â Â Â PMA/PMC for electrification of Un-electrified Off Grid villages in the state of Jammu &Â Kashmir and Arunachal Pradesh. Financial Performance

During the financial year 2017-18, RECPDCL has achieved a total revenue of Rs.207.03 crore against Rs.191.57 crore in the previous year and the Profit After Tax of Rs.36.80 crore as against Rs.40.33 crore in the previous year.

As on March 31, 2018, the Net Worth of the Company has increased by 14.08% to Rs.180.07 crore as compared to Rs.157.84 crore in the previous year. For the financial year 2017-18, the Board of Directors of the company has recommended a dividend of Rs.2,210/- (Rupees Two Thousand Two Hundred Ten only) per equity share (on the face value of Rs.10/- each) subject to the approval of Shareholders in the ensuing Annual General Meeting of the company.

21.2 REC Transmission Projects Company Limited

During the financial year 2017-18, four project specific SPVs have been incorporated viz. Chandil Transmission Limited, Dumka Transmission Limited, Mandar Transmission Limited and Koderma Transmission Limited in respect of Transmission System Strengthening in Jharkhand State (Package 1 to 4) with aggregate estimated cost of Rs.4,605 crore allocated to the Company by Government of Jharkhand to work as Bid Process coordinator for selecting of successful Bidder(s). Further, a project specific SPV viz. Jawaharpur Firozabad Transmission Limited has been incorporated on August 20, 2018 in respect of Transmission Project allocated by UP Power Transmission Corporation Limited.

After completion of bidding process, the following project specific SPV has been transferred to the successful bidder during the financial year 2017-18:-

Sl. No.	Name of Transmission Project	Name of Project Specific SPV	Name of Selected Bidder	Date of Transfer of project specific SPV
1.	Eastern Region Strengthening Scheme - XXI (ERSS-XXI)	ERSS XXI Transmission Limited	M/s Power Grid Corporation of India Limited	January 12, 2018
2.	New WR-NR 765 kV Interregional corridor	WR - NR Power Transmission Limited	M/s Power Grid Corporation of India Limited	March 27, 2018

As on March 31, 2018 the status of following Inter-state and Intra-state transmission projects is as under:-

Sl. No.	Name of Transmission Project	Name of Project Specific SPV	Date of Incorporation of SPV	Status as on date
1.	Transmission system for Phase-I Generation Projects in Arunachal Pradesh	Dinchang Transmission Limited	December 2, 2015	Project on hold as per instruction of CEA &Â Empowered Committee on transmission.
2.	Evacuation of power from 3 x 660 MW Ghatampur Thermal Project	Ghatampur Transmission Limited	December 2, 2016	SPV transferred on June 19, 2018 to Adani Transmission Limited.
3.	Transmission System Strengthening in Jharkhand State (Package-1)	Chandil Transmission Limited	March 14, 2018	The Bidding process is expected to complete during the financial year 2018-19.
4.	Transmission System Strengthening in Jharkhand State (Package-2)	Dumka Transmission Limited	March 23, 2018
5.	Transmission System Strengthening in Jharkhand State (Package-3)	Mandar Transmission Limited	March 26, 2018
6.	Transmission System Strengthening in Jharkhand State (Package-4)	Koderma Transmission Limited	March 19, 2018

Besides the above, during the financial year 2017-18, RECTPCL has also bagged the following assignments:

1. Â Â Â Bid Process Coordinator work for KSEB Transmission works;

2. Â Â Â Preparation of DPR for feeder separation work of MSEDCL;

3. Â Â Â Bid process coordinator &Â PMC services for design, supply, erection, testing &Â commissioning of 220 kV GIS S/s &Â Transmission work of Saligaon by GED.

Financial Performance

During the financial year ended March 31, 2018, RECTPCL has recorded an income of Rs.53.30 crore as compared to Rs.52.38 crore in the previous financial year. The Profit before tax and Profit after tax for the financial year 2017-18 is Rs.47.22 crore and Rs.35.29 crore, respectively. The Net worth of the Company as on March 31, 2018 was Rs.176.54 crore against initial Capital of Rs.0.05 crore injected by Rural Electrification Corporation Limited (holding company) in the year 2007. Further, the Board of Directors of the company have recommended a dividend of Rs.7,058/- per equity share i.e. 70,580% on the paid up equity share of Rs.10/- each for the financial year 2017-18, subject to approval of shareholders in the ensuing Annual General Meeting.

Scheme of Arrangement for amalgamation of RECTPCL with RECPDCL

In order to have better operational efficiency and to reap the benefits of higher capital base &Â pooled resources, it was proposed to merge two unlisted wholly owned subsidiary companies of Rural Electrification Corporation Limited i.e. RECPDCL and RECTPCL into one single entity.

Accordingly, as per provisions of the Companies Act, 2013 and Rules made thereunder and after the approval of Board of Directors, shareholders, creditors of respective companies and approval of holding company i.e. REC, an application was filed with the Ministry of Corporate Affairs (MCA) on March 27, 2018, by both subsidiary companies for sanction of Scheme of Arrangement for amalgamation of RECTPCL (Transferor Company) with RECPDCL (Transferee Company) and the approval of the same is awaited.

22. DETAILS OF JOINT VENTURE AND ASSOCIATE COMPANY

REC, along with three other PSUs, namely Power Grid Corporation of India Limited, NTPC Limited and Power Finance Corporation Limited as partners, has formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL) on December 10, 2009. EESL is a Super Energy Service Company (ESCO). It acts as the resource center for capacity building for State Distribution Companies (DISCOMs), Energy Regulatory Commissions (ERCs), State Development Authorities (SDAs), upcoming ESCOs, financial institutions, etc. REC has contributed Rs.146.50 crore (being 31.71% of paid-up capital of EESL) upto March 31, 2018. However, after infusion of additional equity by other promoters, as on date, REC holds 21.70% of the paid up share capital of the Company.

EESL is formed to create &Â 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, MNRE, 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. EESL today is implementing the largest energy efficiency portfolio in the world. EESLâs energy efficient appliances and technologies have saved India over 40 billion kWh estimated energy annually.

Currently, EESL is implementing worldâs largest non-subsidy based LED lighting programme: Unnat Jyoti by Affordable LED for ALL (UJALA) Programme for distribution of LED bulbs, LED tube lights and Energy Efficient fans to domestic consumers, worldâs largest street light replacement programme: Street Lighting National Programme (SLNP) to replace conventional street lights with smart and energy efficient LED street lights in municipalities, National E-Mobility Programme to provide electric vehicles for Government entities on lease/outright purchase basis to replace the existing petrol and diesel vehicles taken on lease by various Government organizations, worldâs largest Agricultural Demand Side Management programme: AgDSM Programme for replacement of inefficient Agricultural Pump sets in agriculture sector, Building Energy Efficiency Programme (BEEP) to retrofit energy efficient appliances in buildings to make them energy efficient, Smart Meter National Programme (SMNP) to replace conventional meters with smart meters, Municipal Energy Efficiency Programme (MEEP) under AMRUT for implementation of energy efficient pump sets in public water works and sewage systems after approval of the ULB/ State Government, Solar Programme for implementing solar roof top and decentralized small solar power plant, Atal Jyoti Yojna (AJAY) for installation of solar LED street lights in rural, semi-urban areas which donât enjoy adequate coverage of power, Solar Urja Lamps (SoUL) for distribution of solar study lamps to school going children.

The performance of EESL during the year has improved and the financial performance of the company is on the growth path. The turnover of the company has grown from Rs.5 crore in financial year 2012-13 to Rs.1,411 crore in the financial year 2017-18. During the financial year, Profit Before Tax (PBT) is Rs.61.50 crore and the Profit After Tax (PAT) is Rs.39.46 crore.

23. Â Â Â CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to Section 129 of the Companies Act, 2013 and Accounting Standard-21 &Â Accounting Standard-27, the Company has prepared Consolidated Financial Statements including that of its Subsidiary Companies i.e. RECTPCL &Â RECPDCL (Audited) and Joint Venture Company i.e. EESL (Un-audited), which shall be laid before the ensuing 49^th Annual General Meeting along with the Standalone Financial Statements of the Company. However, those wholly owned subsidiary companies which are incorporated by RECTPCL &Â 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. Â Â Â 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 the meetings of Board and Committees thereof. 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.

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 Personnels (KMPs) of the Company. The role of CEO and CFO is being performed by the CMD and Director (Finance) of the Company, respectively.

During the financial year 2017-18, Shri Arun Singh (DIN: 00891728), Independent Director of REC, resigned from the Board of the Company due to personal reasons and ceased to be a Director w.e.f. March 8, 2018.

In terms of order dated May 17, 2012 issued by the Ministry of Power, Government of India, Shri Ajeet Kumar Agarwal (DIN: 02231613) had assumed charge as Director (Finance) of the Company with effect from August 1, 2012 and his tenure of five years came to an end on July 31, 2017. However, Ministry of Power vide its order dated July 19, 2017, extended his tenure as Director (Finance) of the Company from August 1, 2017 to May 31, 2020 i.e. the date of his superannuation, or until further orders, whichever is earlier.

The Ministry of Power, Government of India vide its Order No. 20/6/2017-Coord. dated July 17, 2018, has appointed Dr. Bhagvat Kisanrao Karad (DIN: 00998839) as Non-official Independent Director on the Board of REC for a period of three years from the date of notification of his appointment or till further orders, whichever is earlier.

Further, in line with the statutory requirements, all the Independent Directors have given the requisite declaration that they meet the criteria of independence and none of the Directors are related inter-se.

In accordance with the provisions of the Companies Act, 2013 and Article 91 (iv) of the Articles of Association of the Company, Shri Sanjeev Kumar Gupta (DIN: 03464342), Director (Technical) shall retire by rotation at the 49^th Annual General Meeting of the Company and being eligible, offers himself for re-appointment. The Board of Directors recommends his re-appointment as a Director. His brief resume 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 its Boardâs Report, a statement indicating the manner in which formal annual evaluation of the performance of the Board, its Committees and individual Directors has been made and the criteria for performance evaluation of Independent Directors, as laid down by Nomination and Remuneration Committee.

However, Ministry of Corporate Affairs vide its notification dated June 5, 2015 has inter-alia exempted the Government Companies from the above requirement in case the Directors are evaluated by the Ministry or Department of the Central Government which is administratively in charge of the Company, as per its own evaluation methodology. Further, MCA vide Notification dated July 5, 2017, also prescribed that the provisions relating to review of performance of Independent Directors and evaluation mechanism, prescribed in Schedule IV of the Companies Act, 2013, is not applicable to Government Companies.

Accordingly, REC being a Government company is exempted in terms of above notifications as the evaluation of performance of all the members of the Board of the Company is being done by the administrative Ministry i.e. Ministry of Power and the Department of Public Enterprises (DPE).

Further, your Company also enters into Memorandum of Understanding (MoU) with Ministry of Power, Government of India each year, demarcating key performance parameters for the Company and the performance of the Company is evaluated vis-a-vis MoU parameters.

26. MoU RATING AND AWARDS

The performance of the Company in terms of MoU signed with the Ministry of Power, Government of India for the financial year 2016-17 has been rated as âExcellentâ. This is the 24^th year in succession that REC has received âExcellentâ rating since the year 1993-94 when the first MoU was signed with the Government. The rating for financial year 2017-18 is still awaited.

During the financial year 2017-18, the Company has been conferred with the âCertificate of Recognition for Excellence in Corporate Governanceâby the Institute of Company Secretaries of India (ICSI), at the Rs.17^th ICSI National Awards for Excellence in Corporate Governanceâ, in recognition of its continuous efforts and innovative practices in promoting good corporate governance.

Further, REC has also received the Governance Now 5^th PSU Award, 2017, CBIP Award for Best Power Financing Company and âSCOPE Award for Excellence and Outstanding Contribution to the Public Sector Managementâ for the year 2016-17 under Special Institutional Category, Digitalization, during the year under review.

27. Â Â Â DIRECTORSâRESPONSIBILITY STATEMENT

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

(i) Â Â Â in the preparation of the annual accounts for the year ended March 31, 2018, the applicable Accounting Standards have been followed and no material departures have been made from the same;

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

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

(vi) Â Â Â 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.

28. Â Â Â âTHINK GREEN, GO GREENâINITIATIVE

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 âGreen Initiativeâof Ministry of Corporate Affairs (MCA) and effected electronic delivery of Notices and Annual Reports since 2010-11 to those share holders 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 âTHINK GREEN, GO GREENâ 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 AuditorsâReport, etc.

The Company has also sent reminder letters to such shareholders, whose folios do not have or are having incomplete details with regard to PAN and Bank particulars, requesting them to furnish their PAN and Bank details to the Company for updation. A specimen letter and proforma for updation of PAN, Bank and contact details, forms part of this Annual Report and is also available on the website of the Company.

29. Â Â Â SWACHH BHARAT ABHIYAN

REC organized various cleanliness programmes during the âSwachh Bharat Pakhwadaâ from September 15, 2017 to October 2, 2017 at Corporate Office of the Company. During the cleanliness programmes, banners &Â 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 &Â undertook special cleanliness drive of their respective office premises, toilets, stairs, lifts &Â other surrounding areas. REC organized 10 Nukkad Nataks in different locations across Delhi to spread awareness about hygiene &Â sanitation and waste management by encouraging people to participate in âSwachhta Hi Sevaâcampaign. Old and unwanted records were weeded out as per Record Retention Schedule. In this process official papers, magazines, periodicals, draft reports, etc. were disposed off. A new paper-less software has also been developed for completely discontinuing the use of paper for official work. Cleanliness is continuous process and it will continue in REC.

30. RIGHT TO INFORMATION ACT, 2005

Your Company has taken necessary steps for the implementation of âRight to Information Act, 2005 (RTI)â in the Company and independent RTI Cell has been set up for coordinating the work relating to receipt of applications &Â appeals and furnishing the information &Â disposal off appeals. RTI Handbook, both in English and Hindi, has been placed on the website of the Company.

The status of RTI applications and appeals during the financial year 2017-18 is as follows:

Sl. No.	Particulars	Nos.
1.	Applications received	341
2.	Applications disposed off	335
3.	Applications disposed off subsequently	06
4.	Appeals received by First Appellate Authority, REC	16
5.	Appeals disposed off by First Appellate Authority, REC	16
6.	Second Appeal notice received from Central Information Commission (CIC)	02
7.	Second Appeal disposed off by Central Information Commission (CIC)	02

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

REC encourages participation by Micro, Small and Medium Enterprises (MSMEs) including Micro and Small Enterprises owned by SC/ST and for the guidelines for MSMEs as defined in the purchase procedure, is being followed in the Company.

REC being financial institution, is not executing any project. Hence, only procurement of office equipment like computers, printers and petty purchase i.e. consumables &Â stationery items, other miscellaneous items &Â services, etc. from market are being made. Accordingly, the Company has requested the Ministry of Micro, Small &Â Medium Enterprises, to grant exemption to REC from compliance of MSE procurement target of 20%, including minimum of 4% from MSEs owned by SC/ST Entrepreneurs. However, during the financial year 2017-18, procurement amounting to Rs.1.64 crore were made from MSEs.

REC Public Procurement Policy for MSME is available on the website of the Company.

32. Â Â Â 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 &Â Redressal) Act, 2013, an âInternal Complaints Committeeâhas been constituted in the Company for redressal of complaint(s) relating to 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 2017-18, the Company did not receive any complaint of sexual harassment.

33. Â Â Â EXTRACT OF ANNUAL RETURN

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

34. Â Â Â PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In compliance of the provisions of the Companies Act, 2013, the particulars of contracts or arrangements entered into by the Company with its related parties are disclosed in Form AOC-2, annexed to this report.

35. AUDITORS STATUTORY AUDITORS

M/s G.S. Mathur &Â Co., Chartered Accountants (Firm Reg. No.: 008744N), New Delhi and M/s A.R. &Â Co., Chartered Accountants (Firm Reg. No.: 002744C), New Delhi, were appointed as Statutory Auditors of your Company for the financial year 2017-18 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, 2018.

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 G.S. Mathur &Â Co., Chartered Accountants (Firm Reg. No.: 008744N) and M/s A.R. &Â Co., Chartered Accountants (Firm Reg. No. :002744C), New Delhi as the Statutory Auditors of the Company for the financial year 2018-19 and the Statutory Auditors have also accepted their appointment. Approval of the Members of the Company will be obtained in ensuing Annual General Meeting, to authorize the Board of Directors of the Company, to fix the remuneration of Auditors for the financial year 2018-19.

SECRETARIAL AUDITORS

M/s Chandrasekaran Associates, Practicing Company Secretaries (Certificate of Practice No.3850), New Delhi were appointed as Secretarial Auditors of the Company for carrying out Secretarial Audit for the financial year 2017-18. In terms of Section 204 of the Companies Act, 2013 and Rules made thereunder, they have issued Secretarial Audit Report for the financial year 2017-18 and the same is annexed to this Report.

35.1 Managementâs Comments on the AuditorsâReport

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 they have made certain observations on further strengthening of the internal financial controls. Accordingly, the auditor observations and Management Reply to the observations of the Statutory Auditors is as under:

Observation of Statutory Auditors

Managementâs Reply

Annexure to the Independent AuditorsâReport referred under âReport on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)âof Independent AuditorsâReport on Standalone Financial Statements (Annexure-C) &Â Consolidated Financial Statements (Annexure-A)

In our opinion, the Company has, in all material aspects, an adequate internal financial controls system, except (i) improvement in ERP system relating to determination of non-performing assets, revalidation of the sanctions of loans and recording of non-entertaining/rejection/disposal of applications of the loans, (ii) strengthening of procedures for monitoring of utilization of funds disbursed to the borrowers, (iii) procedure for processing of the claims of service providers, (iv) rotation of duties amongst staff as per HR Policy to be implemented in letter and spirit, over financial reporting.

Continuous efforts are being made to further strengthen the internal control in the said areas.

The Secretarial Auditors of the Company have given an unqualified report for the financial year 2017-18. However, they have one observation relating to composition of Board of Directors. The Managementâs Reply to the observation is as under:

Observation of Secretarial Auditors

Managementâs Reply

During the period under review the Company has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above, including the provisions of Section 149 of the Companies Act, 2013 and read with regulation 17 of SEBI (Listing Obligation &Â Disclosure Requirements), Regulation, 2015, with respect to the composition of Board of Directors till March 7, 2018. Thereafter, vacancy of One Independent Director exists in the Company.

During the financial year 2017-18, the composition of Board of Directors was in compliance with all the applicable provisions till March 7, 2018. However, Shri Arun Singh, Independent Director of the Company, resigned from the Board due to personal reasons and ceased to be a Director w.e.f. March 8, 2018.

Further, Ministry of Power vide its Order dated July 17, 2018 has appointed Dr. Bhagvat Kisanrao Karad as Part Time Non Official Independent Director on the Board of REC.

Accordingly, after the above appointment, the composition of Board of the Company is in compliance with the provisions of the Companies Act 2013, SEBI (LODR) Regulations, 2015 and DPE Guidelines on Corporate Governance for CPSEs.

36. Â Â Â COMMENTS OF C&AG OF INDIA

The Comptroller and Auditor General (C&AG) of India, vide letter dated August 2, 2018 has given âNilâComments on the Audited Financial Statements of the Company for the year ended March 31, 2018 under Section 143 (6) (a) of the Companies Act, 2013. The Comments of C&AG for the financial year 2017-18, have been placed along with the report of Statutory Auditors of the Company elsewhere in this Annual Report.

37. Â Â Â 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.

38. Â Â Â STATUTORY DISCLOSURES

a) Â Â Â There was no change in the nature of business of the Company during the financial year 2017-18.

b) Â Â Â The Company has not accepted any public deposits during the financial year 2017-18.

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

d) Â Â Â 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 âManagement Discussion and AnalysisâReport annexed to this report.

e) Â Â Â Information on composition, terms of reference and number of meetings of the Board &Â its Committees held during the year, establishment of vigil mechanism/whistle blower policy and web-links for familiarization/training policy of Directors, Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions and Policy for determining Material Subsidiaries, Compensation to Key Managerial Personnel, Sitting fees to Independent Directors, etc. have been provided in the Report on Corporate Governance, prepared in compliance of provisions of SEBI (LODR) Regulations, 2015, which forms part of the Annual Report.

f) Â Â Â 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.8 of Notes to Accounts to Standalone Financial Statements.

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

h) Â Â Â 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, 2018 and the date of this report.

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

j) The details related to vigilance cases, replies to audit objections and RTI matters, etc. are duly incorporated in this report, as required vide OM dated January 24, 2018 of the Ministry of Parliament Affairs, Government of India.

k) The Central Government has not prescribed the maintenance of cost records for the products/services of the Company under Companies (Cost Records and Audit) Rules, 2014, read with Companies (Cost Records and Audit) Amendment Rules, 2014 prescribed by the Central Government under Section 148 of the Companies Act, 2013. Accordingly, Cost Accounts and Records are not required to be maintained by the Company.

39. Â Â Â STATUS OF CONSTRUCTION OF REC CORPORATE OFFICE BUILDING AT GURUGRAM

The construction of REC state of art office building at Sector-29, Gurugram is being executed in full swing. RCC works of this G+5 storey building is almost completed except auditorium roof. Services work like installation of HVAC duct, firefighting pipe, electrical work, installation of fresh air &Â ventilation fans, flooring and block masonry work are almost completed in all three basements. Interior work and allied services works in superstructure are also taken up in parallel to civil works. Fagade glass envelope and roof top solar pergola structure works are also in progress. Efforts are being made to complete the building by December, 2018.

During the financial year 2017-18, the building project has been declared winner in two categories (i) Integrated Water Management and (ii) Energy Management by GRIHA Council (Authority giving green building certification) during 9^th GRIHA Summit, which will further help REC in achieving GRIHA 5 Star rating on completion of project.

40. STATUTORY AND OTHER INFORMATION REQUIREMENTS

Information required to be furnished as per the Companies Act, 2013 and SEBI (LODR) Regulations, 2015 and other applicable statutory provisions is annexed to this report as under:

Particulars	Annexure
Management Discussion &Â Analysis Report	I
Report on Corporate Governance	II
Auditorâs Certificate on Corporate Governance	III
Business Responsibility Report	IV
Secretarial Audit Report	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

41. ACKNOWLEDGEMENTS

The Directors are grateful to the Government of India particularly the Ministry of Power, Ministry of Finance, NITI Aayog, DIPAM, DPE and the Reserve Bank of India for their continued co-operation, support and guidance in effective management of the Companyâs 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 G.S.Mathur &Â Co. and M/s A.R &Â Co., Statutory Auditors, M/s Chandrasekaran Associates, Secretarial Auditors and the Comptroller &Â 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.

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â For and on behalf of the Board of Directors

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â P V Ramesh

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Chairman and Managing Director

Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â (DIN: 02836069)

Place: New Delhi

Date : August 23, 2018

Mar 31, 2017

The Shareholders,

Your Directors have pleasure in presenting the Forty Eighth Annual Report together with the Audited Financial Statements of your Company for the financial year ended March 31, 2017.

1. performance highlights

1.1 The highlights of performance of the Company for the financial year 2016-17 were as under with comparative position of previous year''s performance:

(Rs, in crore)

Parameter	FY 2016-17	FY 2015-16
Loans Sanctioned	83,870.82	65,471.10
Disbursements	58,038.61	46,025.83
Subsidy under DDUGJY-RE and DDG	8,037.54	5,023.99
Recoveries (including interest)	46,747.17	47,921.00
Total Operating Income	23,350.79	23,638.35
Profit Before Tax	8,860.70	8,045.21
Profit After Tax	6,245.76	5,627.66

1.2 Financial performance

The total operating income of your Company for the financial year 2016-17 was Rs, 23,350.79 crore as compared to Rs, 23,638.35 crore during the financial year 2015-16. The profit after tax increased by 11% to Rs, 6,245.76 crore from Rs, 5,627.66 crore for the previous year.

Loan asset book of your Company as on March 31, 2017 was Rs, 2,01,928.67 crore as compared to Rs, 2,01,278.29 crore in the previous year. The increase in Loan assets is after considering the repayment of loans of Rs, 33,910.05 crore received under Ujwal DISCOM Assurance Yojana (UDAY). Further, the outstanding borrowings as on March 31, 2017 were Rs, 1,67,517.39 crore.

Earnings Per Share (EPS) for the financial year ended March 31, 2017 was Rs, 31.63 per share of Rs, 10/- each. Net worth of the Company as on March 31, 2017 has increased by 16% to Rs, 33,325.59 crore from Rs, 28,617.76 crore.

1.3 Dividend

In addition to interim dividend of Rs, 7.00 per share paid in March, 2017, the Board of Directors of your Company have recommended final dividend of Rs, 2.65 per share for the financial year 2016-17, which is subject to approval of the Shareholders in the 48^th Annual General Meeting. The total dividend for the financial year 2016-17 will work out to Rs, 9.65 per share, representing 96.5% of the paid-up share capital of the Company as against Rs, 17.10 per share, representing 171% of the paid-up share capital of the Company in the previous year (the decrease in the percentage of dividend from previous year, is due to the issue of Bonus shares in the ratio of 1:1, during the year). The total dividend pay-out for the financial year 2016-17 will amount to Rs, 1,905.80 crore (excluding dividend distribution tax of Rs, 384 crore).

1.4 Share Capital

As on March 31, 2016, the Authorized share Capital of the Company was Rs, 1,200 crore consisting of 120 crore equity shares of Rs, 10/- each and during the financial year 2016-17, the Authorized Capital of the Company was increased from Rs, 1,200 crore to Rs, 5,000 crore as approved by the shareholders of the Company in its 47^th Annual General Meeting held on September 21, 2016.

During the financial year 2016-17, the shareholders of the Company in the 47^th AGM, also approved the proposal for issue of Bonus shares in the ratio 1:1 (i.e. One new equity share of Rs, 10/- each for every equity share of Rs,10/- each). Subsequently,

98,74,59,000 bonus shares were issued & allotted on September 30, 2016 and were credited to eligible shareholders by October 6, 2016. Consequent to issue of Bonus shares, the Issued and Paid up Share Capital of the Company was increased from Rs, 987.46 crore consisting of 98,74,59,000 equity shares of Rs, 10/- each to Rs, 1,974.92 crore consisting of 197,49,18,000 equity shares of Rs, 10/- each.

Further, the President of India acting through Ministry of Power, Government of India divested/sold 2,51,33,733 equity shares

i.e. 1.28 % of total paid up capital of the Company on January 25, 2017 and 98,97,155 equity shares i.e. 0.50% of total paid up capital of the Company on March 22, 2017 through off market sale of shares under the Central Public Sector Enterprises Exchange Traded Fund (CPSE ETF). Accordingly, as on March 31, 2017, the President of India holds 116,25,04,472 equity shares i.e. 58.86% of the paid up equity share capital of the Company.

2. LOANS SANCTIONED

The Company sanctioned loans worth Rs, 83,870.82 crore during the financial year 2016-17, as against Rs, 65,471.10 crore in the previous year. The state-wise and category-wise break-up of loans sanctioned during the financial year are given in Table-1 and Table-2, respectively. The cumulative sanctions up to March 31, 2017 made by your Company since its inception was Rs, 7,65,350.05 crore, as detailed in Table-3.

3. DISBURSEMENTS

A total sum of Rs, 58,038.61 crore was disbursed during the financial year 2016-17 as against Rs, 46,025.83 crore in the previous year. Further, an amount of Rs, 8,037.54 crore (subsidy of Rs, 7,876.85 crore under RE component of DDUGJY and subsidy of Rs, 160.69 crore under DDG) under DDUGJY, has been disbursed. The cumulative amount disbursed since inception up to March 31, 2017 was Rs, 3,87,577.01 crore excluding subsidy under DDUGJY-RE and DDG. The state-wise disbursements and repayment of loan by borrowers during the financial year 2016-17 together with cumulative figures and outstanding as on March

31, 2017 are given in 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 2016-17 was Rs, 46,298 crore as compared to Rs, 48,278 crore during the previous year. The Company recovered a total sum of Rs, 45,169 crore towards performing assets during the financial year 2016-17 as against Rs, 46,641 crore during the previous year. The Company achieved recovery rate of 97.56% for the financial year 2016-17. The overdues from defaulting borrowers pertaining to Performing Assets as on March 31, 2017 was Rs, 1,129 crore.

4.2 Your Company''s Non-Performing Assets (NPAs) continue to be at low levels. As on March 31, 2017, the gross NPA was Rs, 4,872.68 crore, which was 2.41% of Gross Loan Assets and the net NPA was Rs, 3,237.34 crore, which was 1.62% of Net Loan Assets. Further, no doubtful loans have been rescheduled by the Company, during the financial year 2016-17. The details of loans rescheduled during the financial year 2016-17 and their position as on March 31, 2017, are as under:

(Rs,in crore)

particulars		FY 2016-17	FY 2015-16
Standard Loans	No. of Borrowers	19	23
Standard Loans	Amount Outstanding	27,784.80	22,829.88
Sub-Standard Loans	No. of Borrowers	0	3
Sub-Standard Loans	Amount Outstanding	0	1,402.44
Total	No. of Borrowers	19	26
Total	Amount Outstanding	27,784.80	24,232.32

5. FINANCIAL REVIEW

5.1 Summary of Financial Results

The summary of audited financial results of the Company for the financial year 2016-17 vis-a-vis 2015-16 is given as under:

(Rs, in crore)

particulars	Standalone		Consolidated
	FY 2016-17	FY 2015-16	FY 2016-17	FY 2015-16
Revenue from Operations	23,350.79	23,638.35	23,945.16	24,012.88
Other Income	744.56	117.93	740.84	117.05
Total Income	24,095.35	23,756.28	24,686.00	24,129.93
Finance Costs	13,775.12	14,283.12	13,786.36	14,282.35
Other Operating Expenses	350.06	338.10	816.97	604.74
Provisions and Contingencies	1,109.47	1,089.85	1,110.31	1,096.18
Total Expenses	15,234.65	15,711.07	15,713.64	15,983.27
Profit Before Tax	8,860.70	8,045.21	8,972.36	8,146.66
Provision for Taxation	2,614.94	2,417.55	2,658.99	2,455.24

particulars	Standalone		Consolidated
	FY 2016-17	FY 2015-16	FY 2016-17	FY 2015-16
Profit After Tax	6,245.76	5,627.66	6,313.37	5,691.42
Less : Appropriations
Transfer to Special Reserve u/s 36(1)(viii) of the Income Tax Act, 1961	1,881.06	1,900.00	1,881.06	1,900.00
Transfer to Reserve for Bad & Doubtful Debts u/s 36(1)(viia) of the Income Tax Act, 1961	413.33	390.00	413.33	390.00
Dividend	*1,382.44	1,688.55	*1,382.44	1,688.55
Dividend Distribution Tax	*277.46	341.71	*277.46	345.68
Transfer to Debenture Redemption Reserve	196.59	196.59	201.20	196.59
Transfer to General Reserve	-	570.00	3.50	572.89
Surplus carried over to Balance Sheet	2,094.88	540.81	2,154.38	597.71

*The figures of dividend and dividend distribution tax does not include the respective amounts pertaining to Final Dividend for the financial year 2016-17 (as detailed in para 1.3 above) considering that the Company is not required to make any provision in this regard in terms of Revised Accounting Standard 4.

5.2 Contribution to National Exchequer

During the financial year 2016-17, the Company contributed an amount of Rs, 4,097.79 crore as compared to Rs, 3,749.55 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 2016-17	FY 2015-16
Dividend paid to the Government of India	1,126.05	880.19
Dividend Distribution Tax	379.98	293.47
Direct Taxes	2,546.34	2,540.96
Service Tax paid including CENVAT credit	45.42	34.93
Total	4,097.79	3,749.55

5.3 Ratio Analysis

A comparative statement of important ratios of the Company for the financial year 2016-17 vis-a-vis 2015-16 is as below:

particulars	FY 2016-17	FY 2015-16
Earnings Per Share (Rs,)	31.63	28.50
Return on Average Net Worth (%)	20.17	21.05
Book Value per Share (Rs,)	168.75	144.91
Debt Equity Ratio (times)	5.03	5.91
Price Earnings Ratio (times)*	5.72	2.92
Interest Coverage Ratio (times)	1.64	1.56

*PE Ratio has been calculated on the basis of Closing Price of equity share of REC at NSE as on March 31, 2017 & March 31, 2016, respectively.

5.4 Resource Mobilization

The Company mobilized Rs, 28,495.18 crore from the market during the financial year 2016-17. This includes Rs, 7,662.92 crore by way of Capital Gain Tax Exemption Bonds, Rs, 18,600 crore by way of Institutional Bonds, Rs, 2,232.26 crore (i.e USD 330 million) from External Commercial Borrowings (ECB). Further, an amount of Rs, 19,916.85 crore was also raised through Commercial Paper (CP).

Raised Green Bonds of USD 450 Million from International Markets

On June 30, 2017, REC has launched its maiden USD Green Bonds to become the first Indian PSU to launch Green Bonds denominated in US Dollars and raised USD 450 million for a tenure of ten years from the offshore market, against the backdrop of green energy''s enormous potential in the Indian power sector and the Indian Government''s thrust on developing this space.

The bonds have been issued at a yield of 3.965 per cent and have been offered under REC''s existing USD 1 billion Medium Term Note (MTN) programme. The Green Bonds are listed on the London Stock Exchange and Singapore Stock Exchange.

The Green Bonds have been certified by the Climate Bond Initiative, London while the ''Green Bond framework'' formulated by REC has been verified by KPMG. The proceeds will be allocated for financing existing projects including re-financing and new eligible green projects in solar, wind, biomass and small hydro (less than 25 MW), subject to availability of sector-specific technical criteria under Climate Bonds Standard. ANZ, Barclays Bank, BNP Paribas, Mizuho Securities, MUFG Securities and HSBC were the Joint Lead Managers to the issue.

Cash Credit Facilities

The Company has an approved cash credit/WCDL limit of Rs, 5,710 crore for a ailment from various banks for its day-to-day operations.

5.5 Domestic and International Credit Rating Domestic

The domestic debt instruments of the Company continued to enjoy âAAAâ 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 âBaa3â and âBBB-â, respectively.

5.6 Cost of Borrowing

The overall weighted average annualized interest rate of borrowing for the funds raised during the financial year 2016-17 was 6.79% p.a. and for the borrowings outstanding as on March 31, 2017 is 8.02% p.a. As a result, your Company was able to deliver debt financing at competitive rates.

5.7 Redemption and pre-payment

During the year, the Company repaid a sum of Rs, 23,490.05 crore. This includes repayment amounting to Rs, 14,910.60 crore to Institutional bondholders, Rs, 5,349.91 crore worth of Capital Gain Tax Exemption Bonds, Rs, 130.75 crore towards Infrastructure Bonds, Rs, 2,695.51 crore of External Commercial Borrowings and Rs, 403.28 crore of Official Development Assistance (ODA) loan. The Company also redeemed long term loan of Rs, 350 crore and Commercial Papers of Rs, 25,750 crore.

5.8 Financial status at the close of the year

At the close of the financial year 2016-17, the total resources of your Company stood at Rs, 2,09,236.24 crore. Out of this, Equity Share Capital contributed Rs, 1,974.92 crore, reserves and surplus stood at Rs, 31,350.67 crore, Loans from Financial Institutions, Commercial Banks and market borrowings through Bonds and Commercial Papers accounted for Rs, 1,67,517.39 crore, Deferred Tax Liabilities of Rs, 40.26 crore and other liabilities & provisions stood at Rs, 8,353.00 crore. These funds were deployed as Long / Short Term Loans of Rs, 2,00,293.33 crore (net of allowances Rs, 1,635.34 crore), fixed assets (net of depreciation) of Rs, 181.26 crore (including Capital Work in progress), Investments of Rs, 2,696.45 crore, Cash & Bank Balances of Rs, 4,490.02 crore and other assets of Rs, 1,575.18 crore.

5.9 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 Guidelines for Private Sector Renewable Energy projects by revision in sole lending limits, Revision in interest rates for non-conventional generation projects, Policy for investment/deployment of short term surplus funds, Revision in Policy Guidelines for premature repayment/pre-payment of loans, Modification in policy on granting interest rate rebate to state sector utilities/CPSUs, Policy Guidelines for monitoring DE Ratio and COD Extension of State Sector projects, Dividend Distribution Policy and Amendment in CSR & Sustainability Policy, etc.

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 TRANSMISSION & DISTRIBUTION SCENARIO

The present scenario of Transmission and Distribution (T&D) industry is very dynamic with increasing resolve of State Governments to provide reliable power supply to consumers and integration requirements of huge upcoming Renewable Energy Sources with the electricity grid. Based on CEA report as on March 31, 2017, the installed generation capacity of Central, State as well as Private utilities of the country is now a high of approximate 327 GW. Further, as per LGBR for 2017-18 of CEA, the Country would have peak power surplus of 6.8% and energy surplus of 8.8%; which is a really envious position to be in. This may lead to complete phase shift in power scenario of the country vis-a-vis the one which we are traditionally used to, with even currently huge generation capacities lying stranded for the want of adequate power purchase willingness of DISCOMs and mainly the lack of availability of requisite backbone infrastructure at transmission as well as distribution level.

Enormous capacities are planned to be added through Renewable Sources of energy, with the ambitious goal of 175 GW by 2022 and this itself seems fraught of many risks emanating from increasingly lower tariffs from each subsequent bidding, low cost financing requirements, etc. However, the setting up of dedicated Solar Parks along-with making available all major clearances like land, transmission connectivity, etc. by the respective Central / State Government agencies has mitigated these risks to a great extent. Proper planning for further transmission and distribution system development in this light and that the energy from these sources may be largely intermittent, has become even more pertinent. Accordingly, dedicated Green Transmission Corridors are being planned along-with strengthening / augmenting the transmission system to take care of such supply / loading parameters. All this shall pose requirement for planning in line with upcoming renewable energy capacity developments and earnest creation of infrastructure to ensure system availability within the short gestation periods required for renewable generating stations development, thus putting additional onus of TRANSCOs and DISCOMs for system augmentation.

However, Distribution remains to be weakest link in the power sector value chain and most difficult to deal with, due to various reasons. 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 entire power sector.

Major challenges presently being faced by distribution sector includes accumulated losses & depleted net worth of DISCOMs which has severely hindered 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 rationalization leading to cross subsidy, open access issues, delay in release of subsidy by State Government, delayed revenue collection cycle, etc. have caused a dent in their cash flows. The overall performance of 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 & 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. UDAY, the ambitious scheme of Government of India, under which most of the states has already signed MoU and are taking actions as per the scheme, the improvement of operational parameters will take some time, as also defined in MoU.

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 programmes like DDUGJY (Nodal Agency), IPDS, UDAY, NEF (Nodal Agency), Smart Grid task force, etc. With 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 these interventions in conjunction with the reform measures by the respective states starts trickling in and transform the landscape of distribution.

Also, Cross Border Trade of Electricity is currently been taking place with Bangladesh, Bhutan and Nepal under bilateral MoU / Power Trade Agreement. In order to facilitate and promote cross border trade of electricity with greater transparency, consistency and predictability in regulatory approaches across jurisdictions and minimize perception of regulatory risks, the Guidelines on Cross Border Trade of Electricity have been notified by Government of India. Further, various other changes are being proposed in the Standard Bidding Documents of Transmission Projects being executed on Tariff Based Competitive Bidding, in reference to making EPC contractors eligible for participating in development of such projects and change in development model from BOOM to BOOT, etc. Similar to this, few changes have been notified in the Standard Bidding Documents of conventional Generation projects as well.

In terms of changing economic environment, Regulators have revised the Return on Equity for various types of power projects, to realign the sector to these changes. Further, the revision in policies in respect of Short Term and Medium Term Power Purchase by DISCOMs shall help improve transparency and financial viability of their operations. All these are expected to ensure the balanced development of the sector in conjunction with the changing realities of the country, such that adequate capital investment is promoted and interest of power consumers is also secured.

6.1 Major reforms in Distribution Sector

Government of India (GoI) 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. 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. Moreover, under UDAY, Government of India has made necessary provisions for enabling operational as well as financial turnaround of DISCOMs, to enable them in concurrently improving the quality & reliability of power supply. Further, NEF-Interest Subsidy Scheme is also under implementation with objective to promote capital investment & expedite the reform process in distribution sector. The financial outlay of DDUGJY is of Rs, 43,033 crore (Government of India budgetary support of Rs, 33,453 crore) and IPDS with total outlay of Rs, 32,612 crore (Government of India budgetary support of Rs, 25,354 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 & NEF scheme and is playing a key role in supporting the efforts of Government of India in implementation of UDAY. REC has also been providing counterpart funding for a large number of DDUGJY and IPDS projects.

âPower for Allâ document has now been signed by all States and shows the commitment across length and breadth of the country to finally work towards achieving the objective, which not so much in distant past seemed impossible. PFA document has enabled projecting all the capital expenditure by respective states as is required to achieve 24X7 power for all, including the Generation (Conventional / Non-Conventional), Transmission, Distribution, etc. and has thus brought forth the efforts required to achieve the same. The requirement of Capital Expenditure projected under the programme is huge and various Multilateral Agencies e.g World Bank, Asia Infrastructure Investment Bank, etc. have shown their willingness to participate in the same. Your Company has been instrumental in development of âPower for Allâ Web-Portal and is earnestly assisting Ministry of Power in this Endeavour. Your Company is also supporting these efforts by partnering with respective State Utilities in their efforts in terms of making available requisite financing as well as through working with Central & State Governments to resolve any potential issues in achievement of this objective.

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 enables these DISCOMs to weigh their strengths & weaknesses and facilitate a focused approach for achieving further improvements in their operational and financial performance. It also aids 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 âSMARTâ & 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. 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 results 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 though on improved trajectory, but currently remains weak. The DISCOMs are having fragile balance sheets, face prolonged project execution delays, incurring lesser capital expenditure, engaging in 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.

6.2 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. Financially stressed DISCOMs were incapable of supplying adequate power at affordable rates, which has for long hampered the quality of life, overall economic growth and development in the country. Efforts towards 100% village electrification and then 100% household electrification, 24x7 power supply and clean energy cannot be achieved without undertaking adequate capacity building of DISCOMs. Moreover, the issues of frequent power outages need earnest resolution for meeting national priorities like âMake in Indiaâ and âDigital Indiaâ. Unresolved legacy issues with DISCOMs have however kept them trapped in vicious cycle with operational losses being funded by debt. Outstanding debt of DISCOMs had increased from about Rs, 2.4 lakh crore at the end of 2011-12 to about Rs, 4.3 lakh crore in 2014-15. To ensure permanent resolution of all these long standing as well as potential future issues, UDAY had been launched which assures the rise of vibrant and efficient DISCOMs. It empowers DISCOMs with the opportunity to break even in 2-4 years. This is largely 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.

The programme has witnessed significant traction from various State Governments/ DISCOMs already and 27 States/UT are now part of UDAY fold, with 16 States joining for Comprehensive Improvement and balance 10 States & 1 UT joining for Operational Turnaround. With just over a year of its commencement, UDAY is already showing encouraging results. Rs, 2.09 lakh crore worth of DISCOM liabilities have been taken over by State Governments and additionally Rs, 0.23 lakh crore has been restructured / reprised through issuance of bonds already; thus cleaning the balance sheets of DISCOMs and enabling them to restart the Capital Expenditure cycle while also enabling financially viable operations of all power sector stakeholders i.e. DISCOMs, TRANSCOs, GENCOs, IPPs, Banks / FIs, etc.

Your Company has been instrumental in development of UDAY Web Portal https://www.uday.gov.in and UDAY Mobile App, which is a key enabler in achieving the major objectives outlined under the programme. Through Web Portal / Mobile App, all the details with respect to DISCOMs'' performance are readily available vis-a-vis planned trajectory under the scheme. Accordingly, any deviations in the performance get suitably highlighted for all stakeholders, thus prompting DISCOMs to take corrective actions and others to appropriately assess their condition. The latest information with respect to DISCOMs'' performance is now available for use largely within gap of 1 to 3 months.

UDAY by encompassing all the key initiatives required to turnaround the sector, is a programme not just for strengthening of DISCOMs, but is keenly handling most of the current as well as impending issues of the entire power sector, by providing a central platform to participating States for taking up any and all of their concerns / issues with relevant stakeholders. Further, UDAY has undertaken to resolve coal rationalization issues & efficiency improvement of conventional generation segment through NTPC handholding, etc., ensuring better RPO compliance to promote non-conventional generation and loss reduction of transmission segment as well. Your Company is partnering with Government of India to liaise with respective State Governments / Utilities to enable achievement of all the objectives envisaged under the programme.

With UDAY implementation, various UDAY States have in general witnessed the reduction in interest costs, power purchase costs and improvement in operational efficiencies, which has led to significant reduction in their AT&C losses and ACS-ARR gap as compared to their last year performance, thus enabling huge amount of savings on this account. It is expected that in upcoming years, the results of the initiative will become more pronounced.

6.3 National Electricity Fund

REC is 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 both in public and private sector, to improve the infrastructure in distribution sector. The scheme is reform linked and interest subsidy of 3% to 7% is payable to the DISCOMs on achievement on reform based parameters outlined in NEF guidelines. 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, Karnataka, Punjab, Gujarat, West Bengal, Andhra Pradesh and Telangana have already benefitted from the interest subsidy of Rs, 59.34 crore approved under the scheme.

6.4 Urja Mitra

Urja Mitra is a distribution sector initiative of Ministry of Power, being implemented through your Company''s subsidiary RECTPCL.

Urja Mitra is first of its kind application which provides a Central platform (Web-Portal www.urjamitra.com as well as Mobile App) for State Power Distribution utilities to disseminate Power Outage information to urban / rural power consumers across India through SMS/email/push notifications. Power Consumers across the nation shall have prior intimation of expected duration and cause of scheduled power outages and post fault intimation of unscheduled power outages duration. It also provides a platform to view real time power outages in any part of the country, lodge a complaint on power outages, etc. Stakeholder connect is ensured by providing for vernacular mobile apps, which can be used by field staff to trigger power outage information/view ongoing outages/take corrective action on outage complaints, etc.

Data of around 10.10 crore consumers of 49 DISCOMs of 27 states has already been uploaded into the application and more than 6.45 crore power outage SMSs have been sent to the consumers.

6.5 11 kV Rural Feeder Monitoring Scheme

11 kV Rural Feeder Monitoring is a distribution sector initiative of Ministry of Power, being implemented through your Company''s subsidiary RECTPCL. To get complete picture of the entire distribution network in country and to ensure achievement of â24x7 Power for Allâ, it has been felt essential to capture real time supply parameters of rural India and this can be achieved by monitoring the availability/quality of power supply in rural areas of the country by capturing actual distribution parameters i.e. Power supply, outages and by conducting feeder wise Energy audit and AT&C losses calculation. In order to meet this objective, â11 kV Rural Feeder Monitoring Schemeâ has been introduced. Under the Scheme, rural feeders meter data shall be acquired through modem and shall be send to central Meter Data Acquisition System (MDAS) for further analysis and the same shall be integrated with National Power Portal (NPP) to make it available for use of all stakeholders. This scheme targets to develop a self-sustained independent web based automated system for almost 1.1 lakh rural and agricultural feeders across country by acquiring various essential parameters of all the outgoing 11kV rural feeders & such 66/33 kV incoming feeders from where 11kV rural feeders are emanating and making the information available online for all on public portal on real time basis, for power supply monitoring, alerts, meter data analysis, information dissemination and energy audit.

The System would help for monitoring power supply, proper planning, decision support and taking corrective actions on the business activities in addition to transparently disseminating the power supply status. It would further facilitate consolidation of various parameters downloaded from the meters installed on the feeders into a common database thus enabling generation of various MIS reports for analysis and actions.

6.6 Tarang

TARANG is a transmission sector initiative for its better monitoring, being run under guidance from Ministry of Power through your Company''s subsidiary RECTPCL, which has developed âTARANGâ - Transmission App for Real-Time Monitoring and Growth. TARANG provides an informative medium regarding the Pan-India progress of Transmission System which can be drilled down to month wise, agency wise, state wise, etc. for analysis purpose. The details of stalled/delayed projects is separately provided with reasons of delay, so that all stakeholders can take a corrective decision in time to derive benefits from the timely completion of the projects. TARANG monitors the progress of transmission system i.e. both inter-state and intra-state through Tariff Based Competitive Bidding (TBCB) as well as Regulated Tariff Mechanism.

TARANG also shows the prospective upcoming inter-state as well as intra-state projects along with NITs being floated by different

transmission utilities Pan-India. TARANG provides advance information of upcoming transmission projects approved by Empowered Committee on Transmission helping bidders to gear up for future transmission projects.

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 2016-17 are as under:

7.1 Generation

During the financial year 2016-17, your Company sanctioned 22 Nos. of Generation/R&M loans including 6 Nos. of additional loan assistance with total financial outlay of Rs, 28,208.93 crore including consortium financing with other financial institutions.

The breakup of loans sanctioned including additional loan assistance is as under:

(Rs,in crore)

particulars	No. of Loans	Loan Amount
STATE SECTOR
Fresh Loan	14	22,497.39
Additional Loan	2	945.83
private SECTOR
Fresh Loan	2	4,765.71
Additional loan	4	4,765.71
Total	22	28,208.93

7.2 Renewable Energy

During the year, your Company sanctioned loan assistance of Rs, 2,089.77 crore to 16 new grid-connected Renewable Energy projects with installed generation capacity aggregating 367 MW which included 11 Solar photo-voltaic projects aggregating 280 MW; 4 Small

Hydro Power Projects of 61 MW and 1 Wind Project of 26 MW. The total cost of these projects aggregates to Rs, 3,035.53 crore.

The disbursement achieved during the year was Rs, 1,617.68 crore as detailed below:

particulars	Unit	FY 2016-17	FY 2015-16
Projects Sanctioned	Nos.	16	11
Capacity of Sanctioned Projects	MW	367	688
Cost of Projects	Rs, in crore	3,035.53	4,444.78
Loan Sanctioned		2,089.77	2,965.72
Loan Disbursed		1,617.68	304.07

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 Indiaâs 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 2016-17, your Company sanctioned 924 Nos. of Transmission and Distribution schemes involving a total loan assistance of Rs, 40,953.12 crore. This includes primary power evacuation schemes associated with generating plants, system improvement schemes, schemes for Procurement & Installation of equipment/materials like meters, transformers, conductors, tower material, cables, etc., Government approved schemes like DDUGJY & IPDS schemes and Infrastructure schemes for providing electricity access to various categories of Consumers including Agriculture.

7.4 Short Term Loans and others

During the financial year 2016-17, your Company has also sanctioned loans assistance of Rs, 12,619 crore (includes special loan ofRs, 4,919 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 2016-17, a total sum of Rs, 1,427.18 crore was sanctioned and an amount of Rs, 1,433.87 crore was disbursed against various projects relating to Transmission & Distribution, Generation including Renewable projects, etc. in North Eastern states.

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)

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. SBG has also formulated policy for interest rate rebate to the borrowers with commissioned projects and credit rating not below than BBB in order to extend the benefit of decrease in risk factors and improvement in risk classification of the project due to commissioning of the project.

7.8 Investments made/disposed during the financial year 2016-17.

The Company has subscribed to 26,05,42,050 fully paid up 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. Out of the same, the Company sold 7,65,30,185 equity shares at the rate of Rs, 32.25 per equity share under the Buy Back scheme announced by NHPC Limited in March, 2017. The Company earned dividend yield of more than 10% and capital returns of more than 40% on the sale of equity shares.

The Company was allotted 3,47,429 fully paid up equity shares of Housing and Urban Development Corporation Limited (HUDCO) under Initial Public Offering at a price of Rs, 60/- per equity share of Rs, 10/- each amounting to Rs, 2.08 crore in the month of May, 2017.

8. INTERNATIONAL COOPERATION & DEVELOPMENT

REC has availed three lines of ODA credit with KfW, Germany. All of them have been fully drawn as on March 31, 2017. 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 also availed two lines of ODA credit from JICA, Japan. Both 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, 2017.

9. DEENDAYAL UpADHYAYA GRAM JYOTI YOJANA (DDUGJY)

Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY), is 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 up to 15% (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.

DDUGJY is a flagship programme of Government of India supplementing overall rural development and facilitating towards â24x7 Power For Allâ in the country 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/ habitations having less than 100 population is also eligible.

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

9.1 Village Electrification

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.

On August 15, 2015, Hon''ble Prime Minister from the rampart of Red Fort, 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 Leftwing 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.

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 Honâble 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.

In addition to Village electrification, the emphasis has now been laid on Household electrification. To achieve this, updated GARV App has been launched in December 2016 for monitoring Household electrification in all 5.97 Lakh villages. Further, in the portal a feature named SAMVAD, facilitating general public to raise their queries and interact with DISCOM officials, establishing transparency and accountability, has been provided to empower the common man.

9.2 Performance during financial year 2016-17:

a. Sanction:

Under DDUGJY, during the financial year 2016-17, for electrification through grid, projects for Rs, 199.93 crore (including capital subsidy of Rs, 163.91 crore) in 8 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. During the financial year 2016-17, DDG projects for Rs, 255.98 crore (including capital subsidy of Rs, 203.60 crore) have been sanctioned for implementation in 6 States.

b. Fund release:

Under the scheme, during the financial year 2016-17, a sum of Rs, 8,600.60 crore (Loan Rs, 563.06 crore & Subsidy Rs, 8,037.54 crore) has been disbursed to the Implementing agencies.

The subsidy of Government of India is channeled through REC and the matching contribution amount being arranged by the State Government/Implementing Agency through Loan/Equity.

c. Progress of electrification:

During the financial year 2016-17, under DDUGJY, electrification works in 6,015 un-electrified villages (including 298 under State Plan) and intensive electrification in 63,330 villages have been completed. Further, free electricity connections have been provided to 22.42 Lakh BPL households families.

The State-wise details of sanctions, fund release & progress of electrification during the financial year 2016-17 are enclosed in Table-5.

9.3 Cumulative performance up to March 31, 2017:

Under DDUGJY, cumulatively up to March 31, 2017; 5,777 projects for Rs, 1,08,757 crore have been sanctioned and a sum of Rs, 49,662 crore (including GOI grant of Rs, 45,136 crore) have been disbursed to the Implementing agencies.

As regards to physical progress, cumulatively up to March 31, 2017, electrification works in 1,22,159 un-electrified villages (including 771 villages under State Plan) and intensive electrification in 4,14,563 villages have been completed. Further, free electricity connections have been provided to 254.68 Lakh BPL households families.

To achieve village electrification on mission mode, as on March 31, 2017, out of 18,452 un-electrified villages, 13,123 villages have been electrified, 837 villages found in-inhabited leaving a balance of 4,492 un-electrified villages and are targeted for electrification by May, 2018.

The State-wise details of Cumulative Sanction, Fund release & achievements are furnished at Table-6.

10. STANDARDIZATION, QUALITY CONTROL & MONITORING

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 (RQM) under Tier-ll 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 2016-17, RQMs have undertaken inspections of 242 villages in XI Plan Phase-I projects, 2,122 villages & 55 Nos. of material inspections in XI Plan Phase-ll projects and 2,191 villages & 1,150 Nos. of material inspections in XII Plan projects at manufacturer premises for ensuring quality of works.

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) 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 program 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.

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 or more 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 as detailed 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 unfavorable 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:

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 recognize 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 Business 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. The ERP system is hosted at Data Centre of REC and both the Primary Data Centre (PDC) & Disaster Recovery Center (DRC) are ISO/IEC 27001:2013 certified.

Towards 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 comply to e-Reverse Auction as per CVC guidelines and REC Procurement guidelines. In addition, REC has deployed a number of in-house developed systems as a part of IT initiatives towards achieving better e-governance.

Your Company has implemented a full-fledged state-of-art Video Conferencing (VC) solution across all of its offices pan India. The VC facility is being used by Board of Directors for joining in the Meetings of Board/Committees thereof. Corporate office and all field offices of the Company are made Wi-Fi enabled. REC has initiated selection of suitable Data Leakage & Prevention (DLP) package for preventing sharing of confidential and critical information outside the corporate network.

IT initiatives also includes revamping of the website to make it more informative, responsive with features like knowledge sharing and to use it as branding image of REC. Redesigning and revamping of existing static website to an interactive and dynamic website and the revamped portal will be more informative, responsive and will have features like chat, blog, knowledge sharing and message from Chairman Desk.

As step towards providing better facility to employees, HR-ERP access is now available on internet for employees & ex-employees, enabling to use it on the move. IT Division facilitates and promotes the IT initiatives of Government of India like My Gov, e-Governance, Digital India etc. within the Company. The computer to employee population ratio is 100%. IT Division also organizes and imparts various training program to upgrade Computer skills of the employees of the Company.

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 organizations. The programmes are conducted on the state-of-art subjects of Power Generation, Transmission, Distribution and Renewable energy sources. CIRE has been conferred with âEducation Leadership Awardâ by reputed Business School and ABP News National Educational Awards consecutively for the last 3 years in recognition of ''Leadership, Development, Innovation and Industry Interface'' of the Institute.

14.1 National Training programmes (NTp) under DDUGJY

REC/CIRE is the Nodal Agency for coordination and implementation of National Training Programmes for employees of C&D category, under DDUGJY/RGGVY, sponsored by Ministry of Power, Government of India. During the year 2016-17, as against the remaining training target of 26,151 employees of C&D category, 29,153 were trained. With this, the target for training of

1,25,000 employees of C&D category by the power utilities during XII plan under DDUGJY is successfully achieved. In total 1,28,002 employees of C&D category are trained during XII plan period ending March 31, 2017.

CIRE on the request of power utilities, has conducted 78 Programmes for employees of C&D category with 1,949 participants at various locations, namely Jammu/Udhampur (J&K), Jaipur/Jodhpur/Bikaner/Udaipur (Rajasthan), Berhampur (Odisha), Shimla/ Solan/Dharmasala/Una/Hamirpur (HP), Indore (MP), Hisar (Haryana), Warangal (Telangana), etc., under its banner.

14.2 International programmes

CIRE is empanelled by Ministry of External Affairs, Government of India to organize training programmes in the area of power sector under ITEC/SCAAP. During the year, CIRE has organized 8 International programmes with 169 participants, on the topics viz. Solar Power Generation - Grid Enabling (4 weeks); Rural Electrification and Power Management (8 weeks); Design, Erection, O&M of EHV Sub-Stations (4 weeks); Planning and Management of Power Transmission and Distribution System (8 weeks); Best Practices in Power Distribution (4 weeks); Management of Power Utilities using IT/Automated Solutions (5 weeks); Certificate Course in Electric Power Management (12 Weeks) and Latest Trends in Thermal Power Generation (4 weeks). The participants from countries, viz. Afghanistan, Bangladesh, Bhutan, Cambodia, Egypt, Ethiopia, Fiji, Gambia, Ghana, Guyana, Honduras, Indonesia, Iraq, Mali, Malawi, Mauritius, Mongolia, Nepal, Niger, Nigeria, Philippines, Senegal, Sudan, South Sudan, Suriname, Syria, Tajikistan, Tanzania, Tunisia, Turkmenistan, Uganda and Zimbabwe have attended the programmes.

14.3 Regular National programmes

CIRE has organized 27 Regular Training Programmes for the personnel of various Power Utilities/Distribution Companies, on different topics such as, Earthing Practices & Safety Measures in Electrical Installations; Power Transformer Protection - Testing & Maintenance; Planning & Management of Solar Plants & Grid Enabling; Distribution Transformers - Recent Trends in O & M; Design & Construction of EHV Sub-stations & Quality Control; Power Trading & Energy Exchange; O&M and Protection aspects of Distribution Sub-stations; Labour Laws - EPF, ESI, Employees Compensation and Contract Labour Act - Procedures in dealing with Court cases; Underground Cables - Design, Laying,Testing and Maintenance; Technical Specifications and Construction Standards for Distribution System; Information Technology Applications in Power Distribution Management; Power Purchase Agreement; New Developments in Overhead Power Transmission Lines-Design to Construction; Tariff Policy and Submission of ARRs-Regulatory Compliance; Performance Management of Thermal Power Stations for improved efficiency; Gas Insulated and Indoor Sub-stations; O&M of EHV Sub-stations, Lines and Quality Assurance; Protection System for EHV sub-station; New Techniques in Metering, Billing and Collection; Open Access, Power Trading and Availability Based Tariff (ABT); Smart Grid for Smart Cities; Power Factor Improvement and Reactive Power Management; Design & Construction of Distribution Sub-station and Lines; Distribution Loss Reduction - Issues, Challenges and Remedial Measures; Goods & Service Tax (GST); Competitive Bidding-Economical Procurement; and Power Distribution Management. A total number of 320 participants attended the above programmes.

14.4 programmes organized in collaboration

CIRE collaborated with premier Business Management Institute i.e Institute of Public Enterprise and with subject experts and conducted 7 programmes during the year, viz. Companies Act, 2013 & Corporate Governance; Ind AS (IFRS) Adoption in Power Sector; Protection in Power Generating Station; Corporate Social Responsibility; Material Management, Purchase Procedures & E-procurement and Overhead Power Transmission Line Construction Management with 64 participants.

14.5 Customized programmes

Five customized programmes were designed and organized suitable to the utility requirements. The programmes conducted are on âEfficiency Improvement Measures in Distribution Systemâ and âBest Practices in Power Distribution Managementâ for MPPaKVVNL at Indore; two programmes for the Civil Engineers of Punjab State Power Corporation Limited (PSPCL) and one ToT programme of 2-weeks duration for Jammu & Kashmir State Power Development Corporation Limited (JKSPDCL) executives on âHydro and Solar Power Generationâ at CIRE campus. In total, 120 participants were trained under customized programmes.

14.6 In-house Training programmes

CIRE also organized 6 in-house programmes for the employees of REC and 51 employees have taken part in these programmes. The topics covered are Leadership Skills; Business Communication and Presentation Skills; Implementation of Ind-AS in REC; Loan Documentation; Corporate Social Responsibility and Project Appraisal Methodologies & DPR Preparation.

14.7 Skill Development programme

A Skill Development Certificate Course on âPower Managementâ of 6-weeks duration for the unemployed Engineers (Electrical/ Mechanical) was conducted with 28 participants.

14.8 In all, during the year 2016-17, in addition to coordinating and monitoring the National Training Programmes for employees of C&D category, sponsored by MoP, Gol, CIRE has conducted 132 programmes on various themes/subjects and trained 2,701 personnel with 16,314 man days 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 Regional / Sub-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, 5 Executives were appointed through Campus Recruitment during the financial year. The total manpower of the Company as on March 31, 2017 was 566 employees which includes 441 Executives and 125 Non-Executives.

16.1 Reservation in Employment

The directives issued by the Government of India regarding reservations 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, 2017 are given below:

GROUp	Number of Employees
	Total		SC		ST
	FY 2016-17	FY 2015-16	FY 2016-17	FY 2015-16	FY 2016-17	FY 2015-16
A	377	391	36	40	14	14
B	84	99	12	13	2	2
C	35	36	6	7	0	0
D	70	74	21	22	2	1
Total	566	600	75	81	18	17

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 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 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 103 employees to various training programmes, workshops etc. ,within the country and abroad. In addition, 10 training programmes were conducted in-house which were attended by around 100 employees. Taken together, these initiatives enabled the Company to achieve 589 training man days. Further,18 Executives were deputed for programmes in Japan, Dubai, Germany, etc.

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 5 hospitals. Further, part time services of four 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 and also organized a health talk/ workshop on Ergonomics.

Sports Activities

During the financial year 2016-17, your Company hosted an Inter-CPSU Kabaddi Tournament at Jaipur and also sponsored its employees for various Inter-CPSU sports tournaments such as Badminton, Table Tennis, Volley Ball, Kabbadi, Chess, Cricket, 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, 2017, the Company had 96 permanent women employees, which represent 16.96% of the total work force. There is no discrimination of employees on the basis of gender. A Women''s 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''s Cell.

16.5 Industrial Relations

The Industrial Relations scenario in the Company continued to be cordial and harmonious in the financial year 2016-17.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 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

17. corporate SOCIAL responsibility & SUSTAINABLE DEVELOPMENT

The Company has its ''Corporate Social Responsibility & Sustainability Policy'' aligned with the provisions of Companies Act 2013, 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. The copy of the ''REC Corporate Social Responsibility & Sustainability Policy'' is available on the website of the Company at www.recindia.nic.in.

During the financial year 2016-17, 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 programme, education, environmental sustainability, health care including for old age and persons with disabilities, drinking water and sanitation facilities including contribution in Swachh Bharat Kosh, etc .The CSR strategy has been developed with action plan in project-based accountability approach. The CSR activities have been implemented in project-mode, with baseline survey, specified time-frame, identified milestones, periodic monitoring and impact assessment. Disbursement of allocated funds under CSR was linked with achievement of the milestones and deliverables. During the financial year 2016-17, financial assistance aggregating to Rs, 181.23 crore was sanctioned as against CSR Budget of Rs, 146.57 crore (@ 2% of the average net profits of previous three financial years) for various projects under Corporate Social Responsibility and Rs, 69.80 crore was disbursed. A Report on Corporate Social Responsibility and Sustainability Activities including the details of projects and reasons for not spending the minimum required amount during the financial year 2016-17, is annexed to this Report.

The information in respect of CSR projects including thematic areas, location, sanction & disbursement and justification for shortfall in spending the minimum required amount, during the financial year 2016-17, are given in the Report on Corporate Social Responsibility and Sustainability Activities, annexed to this Report.

18. VIGILANCE ACTIVITIES

Vigilance Division constantly endeavored to optimize probity and integrity among employees and to promote 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. are online. Tenders were scrutinized and various suggestions were given for enhancing competitiveness and fairness in purchase procedures. Wherever deviations were observed, the matter was taken up with concerned Divisions, which led to strengthening of appraisal system/guidelines. In this direction, all the employees were sensitized that it is essential to ensure that REC''s CDA rules are followed scrupulously and highest standard of ethics and integrity are maintained by everyone at all times. Review of the Appraisal Guidelines and strengthening of controls in the existing grading & appraisal mechanism to address the issue of Non-Performing Assets in respect of loans disbursed to Private Sector Borrowers was also advised.

Almost all the tenders floated on or after April 1, 2016 by the Company with the value of Rs, 2 lakh and above were processed through E-Procurement mode. 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. HR Division was advised to incorporate the provisions seeking vigilance clearance for resignation, retirement, official foreign visits in the prevalent online vigilance clearance module. Agreed List and List of Officers of Doubtful Integrity were finalized. The matter of rotational transfers from the identified sensitive posts is constantly being pursued up with the HR Division. Prescribed periodical statistical returns were also being sent to CVC and MoP on time.

Vigilance Awareness Week (VAW) was observed in the Company from October 31, 2016 to November 5, 2016. During the week, REC has administered Vigilance pledge, conducted Essay writing and Debate competitions and organized one-day workshop for its employees at REC Corporate office, New Delhi. It has also arranged various programmes like Elocution/Debate, Poem competitions in three colleges and two schools in Delhi. Programmes were also organized in REC''s Subsidiary Companies, Regional Offices and State Offices spread across the country. Valedictory function of Vigilance Awareness Week was organized in REC Corporate office on November 4, 2016. The function was well attended by senior management and employees of REC.

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.

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 submission of IPRs. Annual Property Returns of the employees were subject to systematic scrutiny.

The performance of Vigilance Division was reviewed periodically by 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

Your Company is fully committed to implement the provisions of Official Language Policy of the Government of India. All efforts were made to achieve the targets set under Annual Programme 2016-17 issued by the Department of Official Language. During the year, Official Language Implementation Committee Meetings of the Company were held to review the quantum of work done in Hindi. The implementation of Annual Programme was the primary concern of all these meetings.

The Parliamentary Committee on Official Language conducted inspection of REC Regional Office Bangaluru on April 11, 2016, to assess the use of Hindi in official work. The committee appreciated the progress of Hindi work by Regional Office, Bangalore. The report to this effect has been sent to the Committee and MoP within the prescribed time.

Inspections related to Official Language of REC, Corporate Office and REC, Regional Office, Bhubaneswar by MoP officials were successfully conducted on February 28, 2017 and March 3, 2017, respectively. Further, internal inspections were also carried out by the Competent Authority to assess the progressive use of Hindi in 6 Regional Offices.

To create a conducive environment facilitating the increased use of Hindi in the Company, Hindi fortnight was organized from September 1, 2016 to September 15, 2016 in Corporate office, in which 9 competitions were organized for Senior Officers, Middle Level Officers and employees including class IV employees. A total of 89 employees participated, out of which 41 employees were awarded 57 prizes in the different categories. Hindi fortnight was also organized in all Regional/State offices.

Hindi statement Mujhe khushi hogi yadi ham aapas mein Hindi mein baat kareinâ was also placed in the chambers of all DGM and above officers as well as in all internal Divisions of the Corporate Office.

Further, four Hindi workshops were also organized to give hands-on exposure to participants in various facets of use of Hindi in discharge of their official duties in which 123 Executives/Non-Executives participated. This was done to enable the employees to overcome their hesitation in doing official work in Hindi, as also to impart practical knowledge about the official language policy and related subjects. Two days Hindi Workshop was also organized in Kolkata for Nodal Hindi Officers nominated in Regional/ State/Sub-office/CIRE on November 3 & 4, 2016.

Two issues (January-June, 2016 and July-December, 2016) of In-house Hindi Journal ''Urjayan'' have been published which contained interesting and useful articles as well as literary writings by the employees.

Regional Offices Guwahati and Thiruvananthapuram bagged 2^nd and 3^rd prize, respectively, by concerned Town Official Language Committee (TOLIC) for their excellent work in the progressive use and implementation of official language for the year 2015-16.

This year, an Inter-PSU Hindi typing competition was also organized on August 5, 2016 by CIRE under the aegis of its TOLIC (PSUs) at Hyderabad- Secunderabad.

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. Replacement of conventional lights by LED light, overall energy consciousness, energy efficient equipments, use of solar energy and effective monitoring of power consumption by technical team of SCOPE has resulted substantial saving of 2.09 million units of electricity equivalent to approximately '' 2.19 crore during financial year 2016-17.

20.2 Foreign Exchange Earnings & Outgo

No foreign exchange was earned during the financial year 2016-17. However, the foreign exchange outflow aggregating to Rs, 1801.44 crore was made during the financial year on account of interest, principal repayment, financial 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)

In order to initiate development of each independent Interstate and Intrastate transmission project allocated by Ministry of Power, Government of India and State Government, RECTPCL incorporates Project specific Special Purpose Vehicle (SPV) as Wholly Owned Subsidiary Company and after selection of successful bidder through Tariff Based Competitive Bidding Process for transmission projects as notified by Ministry of Power, the respective Project Specific SPV along with its all assets and liabilities is transferred to the selected bidder. During the financial year 2016-17, three (3) SPVs were incorporated for allocated transmission projects, four (4) SPVs were transferred to the successful bidder and name of another two (2) SPVs were struck off from the Register of Companies under Section 560 of the Companies Act, 1956. As on March 31, 2017, following project specific Special Purpose Vehicles (SPVs) existed as Wholly Owned Subsidiary Companies of RECTPCL:

i. Dinchang Transmission Limited (CIN: U40300DL2015GOI288066)

ii. Ghatampur Transmission Limited (CIN: U40300DL2016GOI308788)

iii. ERSS XXI Transmission Limited (CIN: U40300DL2017GOI310436)

iv. WR-NR Power Transmission Limited (CIN: U40100DL2017GOI310478)

21.1 REC power Distribution Company Limited

During the financial year 2016-17, RECPDCL has excelled in its core business viz. Preparation of Detailed Project Report (DPR), Third Party Inspection (TPI), Material Inspection & Project Management Consultancy (PMC) Services, Project Implementation under R-APDRP Part-A scheme, Enhancement of Energy Efficiency mission and execution of turnkey works relating to the construction of toilets in schools under CSR initiatives of REC under Swachh Vidyalaya Abhiyan.

The major new assignments undertaken during the financial year 2016-17 include (i) PMA works for turnkey execution of Smart Grid project as per NSGM guidelines and deposit work of 66kV Transmission line for Chandigarh Electricity Department; (ii) Project Implementing Agency for construction of Solar Roof Top Power Plant of 508kWp capacity at Rashtrapati Bhawan under REC''s CSR initiative and 16 Nos. of Solar Power Plant for SC/ST residential Schools at Odisha under REC''s Sustainable Development initiative; (iii)PMC & PIA works for (a) Rural Electrification Work of 895 Nos. of Off-Grid Villages in Arunachal Pradesh by installing 300Wp Solar Power Packs and 40Wp Solar Street Lights under DDUGJY; (b) Implementation of Grid connected Roof Top Solar Power Plant in Assam with RECPDCL achieving the record rates much below against the MNRE benchmark rate of '' 75/Wp; and (c) Consultancy Services for carrying out Commercial and Technical Analysis of Distribution System of Narsinghpur Circle (District) of M.P. Poorv Kshetra Vidyut Vitaran Company Limited.

Further, the Company has been engaged as Lead Implementing Agency for managing BEE''s Partial Risk Guarantee Fund for Energy Efficiency and has also signed a MoU with EESL for working as a PMC and AMC for installation of LED street lights across India, as a step forward in the Energy Efficiency sector.

Monitoring of Electrification of Un-Electrified Villages/ Households.

Ministry of Power (MoP) has decided to take electrification of all 18,452 Un-Electrified (UE) villages on Mission Mode. 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 & updating, to develop RE mobile application (GARV App), control room-setup, call centre and quality surveillance checks during electrification of UE villages, etc. to RECPDCL on cost plus basis.

For monitoring the progress of electrification work of UE villages in an effective and speedy manner, the Company has hired and deputed young Engineers as Grameen Vidyut Abhiyantas (GVAs) at Blocks/Districts level and 75 District Vidyut Abhiyantas (DVAs) at District level. The GVAs are responsible for monitoring of the villages and uploading the infrastructure data and photographs on âGARV Appâ (mobile phone application) on daily basis.

Further, GARV App has been updated with new features to provide household electrification data in respect of implementation of rural electrification in around six lakh villages of the country and to enhance the participation of public, it also provides citizen engagement window ''SAMVAD'' for providing their feedback and suggestions which shall automatically alert the concerned officials of DISCOMs through SMS & Email on their dashboard.

Financial Performance of RECPDCL during financial year 2016-17

During the financial year 2016-17, RECPDCL''s total revenue was Rs, 191.57 crore and the Profit After Tax was Rs, 40.33 crore which are 26.42% and 11.15% respectively more as compared to the previous year''s revenue of Rs, 151.54 crore and Profit After Tax of Rs, 36.17 crore. As on March 31, 2017, the Net Worth of the Company has increased by 34.33% to Rs, 157.84 Crore as compared to Rs, 117.50 crore in the previous year. For the financial year 2016-17, the Board of Directors of the company have recommended a dividend of Rs, 2,421/- (Rupees Two Thousand Four Hundred Twenty One only) per equity share (on the face value of Rs, 10/- each) subject to approval of Shareholders in the ensuing Annual General Meeting.

21.2 REC Transmission projects Company Limited

During the financial year 2016-17, the Ministry of Power, Government of India has allocated the following Inter-State Transmission projects with aggregate estimated cost of approx. Rs, 2,237 crore to RECTPCL to act as the Bid Process Coordinator (BPC) for selection of developer for:

i. New WR-NR 765 kV Inter-regional corridor

ii. Eastern Region Strengthening Scheme- XXI (ERSS-XXI)

In addition to the above, Government of Uttar Pradesh has also allocated one Intra-State Transmission project with aggregate estimated cost of Rs, 2,570 crore to RECTPCL for selection of developer for Evacuation of Power from 3X660 MW Ghatampur Thermal Power Project.

For selection of developer 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.The bidding process of following transmission projects allocated during the financial year

2015-16 has been completed and the respective project SPV has been transferred to the successful bidder during the financial year 2016-17:

Sl. No.	Name of Transmission project	Name of project Specific SPV	Name of Selected Bidder	Date of Transfer of project specific SPV
1.	NER System Strengthening Scheme- II (Part-B) & V	NER II Transmission Limited	Sterlite Grid 4 Limited	March 31, 2017
2.	Transmission System Strengthening in WR associated with Khargone TPP (1320 MW)	Khargone Transmission Limited	Sterlite Grid 4 Limited	August 22, 2016
3.	âSystem Strengthening Scheme in Northern Region (NRSS-XXXVI)â along with LILO of Sikar-Neemrana 400kV D/C line at Babai (RRVPNL).	NRSS XXXVI Transmission Limited	Essel Infraprojects Limited	August 22, 2016
4.	Immediate evacuation for North Karanpura (3x660 MW) generation project of NTPC alongwith creation of 400/220 kV sub-station at Dhanbad - Proposal of JUSNL (ERSS-XIX)	North Karanpura Transco Limited	Adani Transmission Limited	July 8, 2016

Further, during the financial year 2016-17, the 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 has issued certificates for dissolution dated May 25, 2016 and July 16, 2016, respectively.

Further, as on March 31, 2017, the bidding process for selection of developer for following transmission projects was under progress:

Sl. No.	Name of Transmission project	Name of project Specific SPV	Date of Incorporation of spv	Expected completion time of bidding process
1.	Transmission system for Phase-I Generation Projects in Arunachal Pradesh	Dinchang Transmission Limited	December 2, 2015	Financial Year 2017-18
2.	Evacuation of Power from 3X660 MW Ghatampur Thermal Power Project	Ghatampur Transmission Limited	December 2, 2016
3.	Eastern Region Strengthening Scheme -XXI (ERSS-XXI)	ERSS XXI Transmission Limited	January 11, 2017
4.	New WR- NR 765 kV Inter-regional corridor	WR-NR Power Transmission Limited	January 12, 2017

During the financial year 2016-17, RECTPCL has also bagged assignments relating to Project Management Consultancy (PMC), Third Party Inspection, Bid Process Management, Project Management and Implementation Agency from HPCL, Vishakhapatnam; and from the state of Goa, Mizoram and J&K.

Financial Performance of RECTPCL during financial year 2016-17

REC Transmission Projects Company Limited has generated an income of Rs, 52.38 crore during the financial year 2016-17. The Profit Before Tax and Profit After Tax was Rs, 49.86 crore and Rs, 34.46 crore, respectively. The Net worth of RECTPCL has increased to Rs, 157.86 crore as against Rs, 123.41 crore during the previous year. For the financial year 2016-17, the Board of RECTPCL has recommended a dividend of Rs, 2,760/- per equity share of Rs, 10/- each, subject to approval of shareholders in the ensuing 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 Limited and Power Finance Corporation Limited as partners, has formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL) on December 10, 2009. REC has contributed Rs, 146.50 crore (being 31.71% of paid-up capital of EESL) up to March 31, 2017.

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 2016-17, based on the standalone audited financials, the company''s revenue from operations was Rs, 1,150.86 crore compared to the previous year revenue from operations of Rs, 774.89 crore. The Profit Before Tax (PBT) was Rs, 81.65 crore as compared to Rs, 50.19 crore in the previous year. Further, the Profit After Tax (PAT) has also increased to Rs, 51.86 crore from Rs, 37.08 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 (Audited) and Joint Venture Company

i.e EESL (Un-audited), which shall be laid before the ensuing 48^th Annual General Meeting along with the Standalone Financial Statements of the Company. However, those wholly owned subsidiary companies which are incorporated by RECTPCL & are subsidiaries 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.

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.nic.in. 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 the meetings of Board and Committees thereof. 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.

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 2016-17, Shri Rajeev Sharma (DIN: 00973413), Chairman & Managing Director was relieved from services of the Company w.e.f October 1, 2016, on relinquishment of charge and Shri Bhagwati Prasad Pandey (DIN: 01393312), Special Secretary, Ministry of Power was assigned additional charge of Chairman & Managing Director initially for a period of three months from October 1, 2016 to December 31, 2016 vide order No.46/8/2011-RE dated September 30, 2016 issued by Ministry of Power. Subsequently, his tenure was extended till January 4, 2017. Thereafter, Dr. P V Ramesh, IAS (AP: 1985) took over the charge of Chairman & Managing Director w.e.f. January 5, 2017, in pursuance of Communications No. 36/02/2016-EO (SM-1) dated December 5, 2016 issued by Department of Personnel and Training, Ministry of Personnel, Public Grievances and Pensions, Government of India.

Further, Smt. Asha Swarup was appointed as Part time Non Official Independent Director on the Board of Company for a period of 3 years from the date of notification of her appointment or till further orders, whichever is earlier, vide Order No.46/2/2010-RE Vol. II (Part- IV) dated February 8, 2017 by the Ministry of Power.

In terms of order dated May 17, 2012 issued by the Ministry of Power, Government of India, Shri Ajeet Kumar Agarwal has assumed charge as Director (Finance) of the Company with effect from August 1, 2012 and his tenure of five years was liable to expire on July 31, 2017. Ministry of Power vide its order dated July 19, 2017, has extended his tenure as Director (Finance) of the Company from August 1, 2017 to May 31, 2020 i.e. the date of his superannuation, or until further orders, whichever is earlier.

In line with the statutory requirements, all the Independent Directors had given the requisite declaration that they meet the criteria of independence and none of the Directors are related inter-se.

The Ministry of Corporate Affairs (MCA) has exempted Government Companies from the requirement of obtaining approval of shareholders for appointment of Whole-time Director(s) and Independent Director(s) vide Notifications dated June 5, 2015 and July 5, 2017, respectively. Accordingly, the appointment of Functional and Independent Directors on the Board of the Company, are not required to be approved by the shareholders.

As per the provisions of the Companies Act, 2013 and in terms of provisions of Article 91 (iv) of Articles of Association of the Company, Dr. Arun Kumar Verma (DIN: 02190047), Government Nominee Director, shall retire by rotation at the 48^th Annual General Meeting and being eligible, offers himself for re-appointment. The Board of Directors recommends his re-appointment as a Director. His brief resume 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 its 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.

However, Ministry of Corporate Affairs vide its notification dated June 5, 2015 has inter-alia exempted the Government Companies from the above requirement in case the Directors are evaluated by the Ministry or Department of the Central Government which is administratively in charge of the Company, as per its own evaluation methodology. Accordingly, REC being a Government company is exempted in terms of above notification as 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.

Further, MCA vide Notification dated July 5, 2017 prescribed that the provisions relating to review of performance of Independent Directors and evaluation mechanism, prescribed in Schedule IV of the Companies Act, 2013, is also not applicable to Government Companies.

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 2015-16 has been rated as âExcellentâ. This is the 23^rd year in succession that REC has received âExcellentâ rating since the year 1993-94 when the first MoU was signed with the Government. For the financial year 2016-17 also, the Company is poised to receive âExcellentâ rating.

During the year, your Company has received âBest Power Financing Companyâ award in CBIP Awards, 2017; won Gold Trophy for âSCOPE Meritorious award for Best Public Sector Financing Institution or Insurance Companyâ for the year 2014-15 and also received âSCOPE Award for Excellence and Outstanding Contribution to the Public Sector Managementâ for the year 2014-15 from Hon''ble President of India in April, 2017.

27. 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, 2017, the applicable Accounting Standards had been followed and no material departures had been made from the same;

(ii) such accounting policies had 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 had 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 had been prepared on a going concern basis;

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

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

28. âTHINK GREEN, GO GREEN'' INITIATIVE

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 share holders 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. The Company has also appointed an IT Management consultant for digitalizing its operations, so as to create a paper-less office environment by reducing the consumption of paper.

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 âTHINK GREEN, GO GREENâ initiative.

29. SWACHH BHARAT ABHIYAN

REC has organized various cleanliness programmes i.e. âSwachh Bharat Pakhwadaâ from May 1, 2016 to May 15, 2016; âSwachh Bharat Missionâ (Swachta Pakhwada) from June 16, 2016 to June 30, 2016 & âSwachhta Abhiyanâ (National Cleanliness Campaign) during September 26, 2016 to October 2, 2016 at Corporate office 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. 4,000 kg waste official papers, magazines, periodicals, draft reports, etc. were disposed off. Printing of logo of âSwachh Bharat Missionâ 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.

30. RIGHT TO INFORMATION ACT, 2005

Your Company has taken necessary steps for the Implementation of âRight to Information Act, 2005 (RTI)â in the Company and independent RTI Cell has been set up for coordinating the work relating to receipt of applications & appeals and furnishing the information & disposal of appeals. RTI Handbook, both in English and Hindi, has been placed on REC website.

The status of RTI applications and appeals during the financial year 2016-17 is as follows:

Sl. No.	particulars	Nos.
1.	Applications received	298
2.	Applications disposed off	288
3.	Applications disposed off subsequently	10
4.	Appeals received by First Appellate Authority, REC	26
5.	Appeals disposed of by First Appellate Authority, REC	26
6.	Second Appeal notice received from Central Information Commission (CIC)	12
7.	Second Appeal disposed of by Central Information Commission (CIC)	12

31. reporting UNDER public procurement policy FOR MICRO & SMALL ENTERPRISES (MSEs) ORDER, 2012.

To encourage participation by 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/uploads/files/Public Procurement Policy.pdf REC being financial institution is not executing any project. Hence, only procurement of office equipment like computers, printers and petty purchase i.e .consumables & stationery items, etc. from market are being made. During the financial year 2016-17, procurement amounting to '' 1.44 crore were made from MSEs.

32. 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) relating to 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 2016-17, no complaint of sexual harassment was received in the Company.

33. EXTRACT OF ANNUAL RETURN

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

34. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

35. 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 2016-17 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, 2017.

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 A.R. & Co., Chartered Accountants (Firm Reg. No.: 002744C), New Delhi and M/s G.S. Mathur & Co., Chartered Accountants (Firm Reg. No.: 008744N) as the Statutory Auditors of the Company for the financial year 2017-18 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 2017-18.

SECRETARIAL AUDITORS

M/s Sanjay Grover & Associates, Practicing Company Secretaries (Certificate of Practice No.3850), New Delhi were appointed as Secretarial Auditors of the Company for carrying out Secretarial Audit for the financial year 2016-17. In terms of Section 204 of the Companies Act, 2013 and Rules made there under, they have issued Secretarial Audit Report for the financial year 2016-17 and the same is annexed to this Report.

35.1 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 observation and Management Reply to the observation of the Statutory Auditors is as under:

Observation of Statutory Auditors

Management''s Reply

Annexure to the Independent Auditors'' Report referred under âReport on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (âthe Actâ)'' of Independent Auditors'' Report on Standalone Financial Statements (Annexure-C) & Consolidated Financial Statements (Annexure-A)

In our opinion, the Company has, in all material aspects, an adequate internal financial controls system, except (i) improvement in ERP system relating to classification of loans & advances as secured or unsecured, determination of non-performing assets in the ERP system, shift in the moratorium period due to structuring/restructuring, revalidation of the sanctions of loans and recording of non-entertaining/rejection/disposal of applications of the loans, (ii) strengthening of procedures for monitoring of utilization of funds disbursed to the borrowers, (iii) procedure for processing of the claims of travel agent, over financial reporting.

Continuous efforts are being made to further strengthen the internal control in the said areas.

The Secretarial Auditors of the Company have given an unqualified report for the financial year 2016-17. However, they have one observation relating to a Related Party Transaction. The Management Reply to the observation is submitted as under:

Observation of Secretarial Auditors

Management''s Reply

The Company has complied with the provisions of the Act, Rules and Regulations, to the extent applicable except that for one related party transaction, entered in ordinary course of business and on arm''s length as per the explanation given by the Company, post facto approval of the Audit Committee was obtained, which is not in line with SEBI (LODR) Regulations, 2015.

During the financial year 2016-17, REC appointed SBICAP Securities Limited, a Related Party, as arranger for raising money through issue of bonds, in the ordinary course of its business & on arm''s length basis through competitive bidding. As per the requirement of Companies Act, 2013 and Rules made there under, no approval of Audit Committee or Board of Directors was required to be obtained for such a transaction. However, as per SEBI (LODR) Regulations, 2015, prior approval of Audit Committee is required for all Related Party Transactions.

Since the appointment of SBICAP Securities Limited as arranger was done on competitive bidding basis, it was difficult to obtain prior approval of Audit Committee in this regard. Further, the approval of Audit Committee was obtained as soon as SBICAP Securities Limited was appointed. However, to avoid such situation in future, omnibus approval of Audit Committee has been obtained for all such Related Party Transactions in terms of SEBI (LODR) Regulations, 2015.

36. COMMENTS OF C&AG OF INDIA

The Comptroller and Auditor General (C&AG) of India, vide letter dated August 3, 2017 has given ''Nil'' Comments on the Audited

Financial Statements of the Company for the year ended March 31, 2017 under Section 143 (6) (a) of the Companies Act, 2013.

The Comments of C&AG for the financial year 2016-17, have been placed along with the report of Statutory Auditors of the Company elsewhere in this Annual Report.

37. DEBENTURE TRUSTEES

38. STATUTORY DISCLOSURES

a) There was no change in the nature of business of the Company during the financial year 2016-17.

b) The Company has not accepted any public deposits during the financial year 2016-17.

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) Information on composition, terms of reference and number of meetings of the Board & its Committees held during the year, establishment of vigil mechanism/ whistle blower policy and web-links for familiarization/ training policy of Directors, Policy on Materiality of Related Party Transactions and Dealing with Related Party Transactions and Policy for determining Material Subsidiaries, Compensation to Key Managerial Personnel, Sitting fees to Independent Directors, etc. have been provided in the Report on Corporate Governance, which forms part of the Annual Report.

f) 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.

g) Since the provisions of Section 197 of the Companies Act, 2013 and Rules made there under, related to Managerial Remuneration, are not applicable to Government Companies, no disclosure is required to be made.

h) Being a Government Company, REC is exempt from the statutory provisions relating to performance evaluation of Directors and disclosure in respect of evaluation mechanism in the Board''s Report of the Company.

i) 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, 2017 and the date of this report.

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

39. STATUS OF CONSTRUCTION OF REC corporate office building at gurugram

The construction of Corporate Office building at Gurugram, Haryana was started in April, 2015 and the RCC works up to 2^nd floor (including three basements) have been completed. Further, work relating to RCC at 3^rd floor, installation of HVAC duct & fire fighting pipe etc. are being executed simultaneously.

The project has been awarded by GRIHA Council for exemplary demonstration of ''Passive Architecture Design'' under GRIHA rating during 8^th GRIHA Summit in March, 2017. Further, the building has unique features such as composite structure to support roof top solar pergola, provision of radiant cooling slabs, seamless white fair finish columns with use of imported shuttering etc. & adoption of construction technology at par with developed countries.

40. 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
Auditor''s 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

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

For and on behalf of the Board of Directors

p V Ramesh

Chairman & Managing Director

(DIN: 02836069)

Place: New Delhi

Date : August 21, 2017

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-Ã -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 Â (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 faÃ§ade 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 Â 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-Ã -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 fÃ¼r 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 faÃ§ade, 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-Ã -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 KreditanstaltfÃ¼rWiederaufbau (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 Â 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) Â 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)ÂScheme 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 Â 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 Â XXIX;

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

iii. Northern Region System Strengthening Scheme, NRSS Â 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:Â

(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

Mar 31, 2012

The Directors have pleasure in presenting the Forty Third Annual Report together with the Audited Financial Statements of your Company for the financial year ended 31st March, 2012.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the financial year 2011-12 were as under with comparative position of previous year's performance:-

(Rs. in crore)

Parameter 2011-12 2010-11

Loans sanctioned (excluding subsidy under RGGVY) 51296.77 66419.98

Disbursements (including subsidy under RGGVY) 30593.30 28517.11

Recoveries (including interest) 18440.09 16951.31

Total Operating Income 10337.59 8256.91

Profit before tax 3792.86 3476.63

Profit after tax 2817.03 2569.93

1.2 Financial Performance

The total operating income of your Company for the financial year 2011-12 increased by 25% to Rs. 10337.59 crore from Rs. 8256.91 crore during the previous year.The profit after tax increased by 10 % to Rs. 2817.03 crore from Rs. 2569.93 crore for the previous year.

Loan asset book of your Company as on 31st March, 2012 has increased by a healthy 24% to reach a historic high of Rs. 101426 crore from Rs. 81725 crore in the previous year. The outstanding borrowings as on 31st March, 2012 were Rs. 89968 crore.

Earnings Per Share (EPS) for the financial year ended 31st March, 2012 is Rs. 28.53 per share of Rs. 10/- each. Net worth of the Company as on 31st March 2012 has increased by 15% to Rs. 14745 crore from Rs. 12788 crore in the previous year.

1.3 Dividend

In addition to interim dividend of Rs. 5/- per share paid in February, 2012, Directors of your Company have recommended a final dividend of Rs. 2.50 per share for the financial year 2011-12, which is subject to approval of the Shareholders in the ensuing Annual General Meeting. The total dividend for the financial year 2011-12 will work out to Rs. 7.50 per share and is same as was paid last year. The total dividend pay-out for the financial year will amount to Rs. 740.60 crore (excluding dividend tax).

1.4 Share Capital

The Issued and Paid up Share Capital as on 31.03.2012 is 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. 51296.77 crore during the financial year 2011-12, as against Rs. 66419.98 crore in the previous year, excluding subsidy under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). 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 31.03.2012 was Rs. 404376.79 crore including subsidy under RGGVY.The cumulative state-wise position of sanctions up to the end of financial year 2011-12 is given in enclosed Table-3.

3. DISBURSEMENTS

A total sum of Rs. 30593.30 crore was disbursed during the financial year 2011-12 as against Rs. 28517.11 crore in the previous year including subsidy under RGGVY. The cumulative amount disbursed since inception up to 31.03.2012 was Rs. 165872.91 crore excluding subsidy under RGGVY. The state-wise disbursements and repayment by borrowers during the year together with cumulative figures and outstandings as on 31.03.2012 are given in enclosed Table-4.

4. RECOVERIES

4.1 The amount due for recovery including interest during the financial year 2011-12 was Rs. 18528.61crore as compared to Rs. 16979.84 crore during the previous year. The Company recovered a total sum of Rs. 18440.09 crore during the year 2011-12 against Rs. 16951.31 crore during the previous year. The overdues from defaulting borrowers as on 31.03.2012 were Rs. 283.64 crore. The details are given as under:

(Rs. in crore)

Particulars Amount

Overdues as on 1.4.2011 195.13

Dues receivable during the year 18528.61

Received during the year 18440.09

Overdues as on 31.03.2012 283.64

Principal repayments due on 31.03.2012 of three State Sector Power Utilities with outstanding loan of Rs. 11591 crore and one Private Sector borrower with outstanding loan of Rs. 375 crore, were rescheduled due to extension of Commercial Operation Date (COD) of their projects.

4.2 Out of the overdues of Rs. 283.64 crore as on 31.03.2012, a sum of Rs. 69.89 crore stands recovered as on 31.05.2012.

4.3 Your Company's Non-Performing Assets (NPAs) continue to be at the low levels. As on 31.03.2012, the Gross NPAs of the Company stood at Rs. 490.40 crore (i.e. 0.48% of Gross Loan Assets), as compared to Rs. 19.54 crore (0.02% of Gross Loan Assets) as on 31.03.2011. Our loans provided to Shree Maheshwar Hydel Power Corporation Limited and Konaseema Gas Power Limited had to be classified as substandard assets during the year due to non-servicing of loan on account of issues concerning Re-settlement/Re-habilitation and low availability of gas etc. respectively, faced by the projects.

5. FINANCIAL REVIEW

5.1 A summary of Financial Results

The summary of audited financial results of the Company for the financial year ended 31stMarch, 2012 is given as under:

(Rs. in crore)

Particulars Standalone Consolidated

2011-12 2010-11 2011-12 2010-11

Gross Income 10509.07 8495.26 10553.62 8532.20

Profit before tax 3792.86 3476.28 3825.80 3498.80

Depreciation 3.27 3.03 3.34 3.06

Provision for Income Tax , Deferred Tax & FBT 975.83 906.35 987.14 913.91

Net Profit available for appropriations 2817.03 2569.93 2838.66 2584.89

Appropriations :

Transfer to Special

Reserve u/s 36(1) (viii) of the Income Tax Act, 1961 681.70 610.11 681.70 610.11

Transfer to Reserve for Bad & Doubtful Debts u/s 36(1)(viia) of the Income Tax Act, 1961 159.59 144.09 159.59 144.09

Interim Dividend 493.73 345.61 493.73 345.61

Dividend Tax on

Interim Dividend 80.09 57.39 80.09 57.39

Proposed Final

Dividend 246.86 394.98 246.86 395.03

Dividend Tax on proposed Final

Dividend 40.05 64.08 40.08 64.09

Transfer to Reserve for Doubtful Debts - - 0.43 0.20

Transfer to Debenture

Redemption Reserve 113.99 - 113.99 -

Transfer to General

Reserve 281.73 260.00 289.73 263.00

Balance carried forward 719.29 693.67 732.46 705.37

Note:Consequent to the notification of Revised Schedule-VI under the Companies Act, 1956, the financial statements for the year ended 31st March, 2012 have been prepared as per Revised Schedule-VI. Accordingly, the previous year figures have also been re-classified to conform to this year's classification.

5.2 Resource Mobilization

Your Company mobilized Rs. 29709.36 crore from the market during the financial year 2011-12 for its operational requirements. This includes Rs. 5239.36 crore raised by way of Capital Gains Tax Exemption Bonds, Rs. 157.59 crore by way of Infrastructure Bonds under Section 80CCF of Income Tax Act, 1961, Rs. 3000 crore by way of Tax Free Secured

Redeemable Non-convertible Bonds u/s 10(15)(iv)(h) of Income Tax Act, 1961, Rs. 17465.60 crore by way of non- priority sector bonds, Rs. 3231.46 crore by way of External Commercial Borrowings and Rs. 615.35 crore by way of Official Development Assistance (ODA) loan from KfW, Germany, & Japan International Cooperation Agency (JICA), Japan.

External Commercial Borrowings

Your Company mobilized USD 670 million (Rs.3231.46 crore) from international markets during the financial year 2011-12, by way of Swiss bonds equivalent to USD 220 million and Syndicated Term Loans equivalent to USD 450 million .

Cash Credit Facilities

Your Company has tied up cash credit limits of Rs. 2500 crore with various banks for its day to day operations.

5.3 Domestic and International Credit Rating

Domestic

During the financial year 2011-12, the domestic debt instruments of REC continued to enjoy "AAA" or equivalent rating Ã the highest ratings assigned by CRISIL, CARE, FITCH & 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 annualized average cost of funds during the financial year 2011-12 was 8.05%p.a. As a result your Company was able to deliver debt financing at competitive rates. As per the Finance Act 2006, Rural Electrification Corporation Limited (RECL) and National Highways Authority of India (NHAI) are the only two companies eligible to raise money through Capital Gains Tax Exemption Bonds issued under Section 54 EC of the Income Tax Act, 1961.

5.5 Redemption and Pre-Payment

During the year, the Company repaid a sum of Rs. 12483.22 crore. This includes repayments amounting to Rs. 11.48 crore to the Government of India, Rs. 2759.22 crore to non-priority / priority sector bond holders, Rs. 2995.11 crore to bond holders of Capital Gains Tax Exemption Bonds, Rs. 870.26 crore towards external commercial borrowings and Rs. 119.56 crore towards Official Development Assistance (ODA) loans. The Company also redeemed long term loans from Banks amounting to Rs. 5727.59 crore.

5.6 Financial status at the close of the year

At the close of the financial year 2011-12, the total resources of your Company stood at Rs. 108728.59 crore. Out of this, Equity Share Capital contributed Rs. 987.46 crore, Reserve and Surplus stood at Rs. 13757.46 crore, Loans from LIC, Commercial Banks and market borrowings accounted for Rs. 90056.47 crore and other liabilities & provisions stood at Rs. 3927.20 crore. These funds were deployed as Long / Short Term Loans of Rs. 101361.74 crore, Fixed Assets of Rs. 78.48 crore (including Capital Work in progress & Intangible Assets under development), Investments of Rs. 757.59 crore, Deferred Tax Assets of Rs. 10.05 crore, Cash & Cash Equivalents of Rs. 5311.48 crore and other assets of Rs. 1209.25 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.

In spite 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 inflation etc., your 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

A reliable transmission and distribution system is important for the proper and efficient transfer of power from generation facilities to sub-stations or between sub-stations and up to the consumer. A transmission and distribution system is typically comprised of transmission lines, sub-stations, switching stations, transformers and distribution lines. Distribution is the most challenging area as compared to Transmission due to various reasons and your Company has always strived to play an active role in creation of new infrastructure and improvement of the existing ones, as well as encourage the various reform measures and technology interventions under distribution sector in the country to help turnaround the sector.

Distribution sector is responsible for collecting revenue from consumers and thereby plays a significant role for sustenance of the Power sector.

6.1 Major reforms in Distribution sector

Electricity Act, 2003, along with various policy announcements such as National Tariff Policy, National Electricity Policy, Rural Electrification Policy etc, provides a comprehensive framework and also the blueprint for power sector reforms. The previous decade has seen significant progress in implementation of various aspects of the reforms agenda Ã in most states the process of unbundling, corporatisation, instituting regulatory commission etc, has been completed; the two ambitious programmes, namely,the Re-structured Accelerated Power Development and Reform Programme (R-APDRP), for undertaking improvements in urban pockets, and the RGGVY, for providing the much needed boost for rural infrastructure, are both going ahead with full force. To ensure competition in distribution, bottlenecks in open access implementation have been removed. REC has provided counterpart funding for a large part of the R-APDRP projects which aim to reduce the Aggregate Technical and Commercial (AT&C) losses considerably in various towns.

Keeping in view the huge funding requirements of the state sector distribution segment of the power sector, the National Electricity Fund (NEF), an interest subsidy scheme was conceived and operationalised by the Central Government as the catalyst for incentivising investment into development, upgrading, renovation & modernisation of power distribution infrastructure in the country.

Technology intervention and evolution of smart grids in Power Distribution Sector

Technology enables the electric system to become "smart". Near-real-time information allows utilities to manage the entire electricity system as an integrated framework, actively sensing and responding to changes in power demand, supply, costs, quality, and emissions across various locations and devices. 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.

R-APDRP & Reduction of AT&C losses

The experience of APDRP in X Five Year plan has shown that sustained loss reductions can only be achieved by taking up issues concerning governance, commercial intervention and adoption of technology and modernization of the infrastructure. APDRP was therefore re-launched as R-APDRP by making it more performance-based and financially attractive.The success of programme would depend on pinpointing of problem areas and ensuring accountability and responsibility.

It has also been reported that the best results in improving energy efficiency in the power distribution sector have often been obtained by separating agricultural consumers from domestic and industrial areas through separate feeders, and by conversion of low voltage distribution systems into High Voltage Distribution Systems (HVDS) in theft prone areas, both rural and urban.

National Electricity Fund

National Electricity Fund, an Interest Subsidy Scheme has been set up by Ministry of Power, Government of India to provide interest subsidy on loans disbursed to the State Power Utilities, Distribution Companies (DISCOMs) Ã both in public and private sector, to improve the infrastructure in distribution sector.

Under National Electricity Fund (NEF), interest subsidy would be provided on loans taken by private and public power utilities in distribution sector for all Distribution Sector Infrastructure capital projects, provided that the proposed works have not been funded through the R-APDRP or RGGVY schemes.

National Electricity Fund 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 is the designated nodal agency to operationalise the scheme for channelizing the interest subsidy amounts from the Government of India to the state utilities, with the approval of Steering Committee constituted for the National Electricity Fund scheme.

For financial assistance under NEF, the States have been categorized as "Special category and focused states", and "States other than special category and focused states".

The pre-conditions for eligibility are linked to reform measures taken by the States and the amount of interest subsidy is linked to the progress achieved in reforms-linked parameters.

Power utilities eligible for subsidy on interest would be assigned marks based on baseline parameters. Based on the consolidated score achieved on these parameters, the utilities would be categorized and will be eligible for subsidy in interest rates from 3% to 5% in "States other than Special category and focused states" and 5% to 7% in "Special Category and focused states". These would be monitored on annual basis and eligibility of the utility and subsidy in Interest rate will be calculated accordingly.

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 2011-12 are as under:

7.1 Generation

During the financial year 2011-12, your Company sanctioned 16 nos. of generation / R&M loans including 1 no. of additional loan assistance with total financial outlay of Rs. 22834.34 crore including consortium financing with other financial institutions, and has disbursed Rs. 12349.12 crore against the on going 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 3 12486.22

Additional Loan 1

PRIVATE SECTOR

Fresh Loan 12 10348.12

Total 16 22834.34

7.2 Renewable Energy

Continuing with our foray into the area of renewable energy financing, your company sanctioned loan assistance of Rs. 342.19 crore for eight nos. grid-connected Renewable Energy projects with installed generation capacity aggregating 70 MW, with total project cost aggregating Rs. 685.47 crore. These include 5 nos. Solar Photovoltaic projects, 2 nos. Bio-mass projects and 1 no. Small Hydro project, besides additional loan to existing Small Hydro project and Solar Photovoltaic project. Your company disbursed a sum of Rs. 144.54 crore during the financial year 2011-12 towards Renewable Energy Projects.

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 country's objective to provide power for all by the year 2012 and also 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 year 2011-12, your Company sanctioned 1033 nos. of Transmission and Distribution schemes involving a total loan assistance of Rs. 23506.64 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 in brief are as under:

System Improvement

During the financial year 2011-12, a total of 830 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs. 19998 crore. This included: (i) 63 schemes involving a loan assistance of Rs. 2203.91 crore for financing investment in the distribution system by way of installation of essential equipments like transformers, meters, capacitors etc. (ii) 24 schemes involving a loan assistance of Rs. 742.24 crore for conversion of Low Voltage Distribution to High Voltage Distribution System (HVDS), (iii) 101 schemes for Rs. 2634.86 crore for improving the distribution system, and (iv) 369 schemes for Rs. 5898.70 crore towards counterpart funding of Part-B of R-APDRP projects and (v) 273 schemes for loan assistance of Rs. 8518.44 crore for improving the transmission network.

Feeder Segregation Scheme

The power supply for agriculture sector in India has been heavily subsidized and, agricultural consumers are normally charged around 10 per cent of the cost of supply. In many states these consumers are paying a flat rate per unit of horsepower per pump and the actual level of power use is not metered. The balance part of the tariff is provided by state Governments as part of agricultural subsidy. Moreover, feeder wise amount of power consumed on a specific feeder cannot be differentiated between rural non-agriculture and agriculture consumption.

Further, the load shedding hours are much more in rural areas because of power deficit and lack of accountability between rural non-agricultural and agricultural consumption. Quite often state utilities seek to limit the supply hours to agricultural consumers in the range of 6-8 hours, normally during night time. It is in this context that several states in India have undertaken the program of rural feeder segregation that separates supply to rural non-agricultural & agricultural consumers. Through this mechanism, utilities have attempted to measure and limit the amount of power supplied for free for irrigation, while ensuring that rural non- agricultural consumers receive better quality supply for longer periods. The states like Andhra Pradesh, Gujarat, Haryana, Punjab, Karnataka, Maharashtra and Rajasthan have already initiated rural load segregation schemes.

REC till the close of Financial Year 2011-12 has sanctioned financial assistance of Rs. 7079 crore under feeder separation/ segregation programme in the states of Maharashtra, Uttarakhand, Haryana, Uttar Pradesh, Madhya Pradesh and Chhattisgarh. REC in its endeavour to improve distribution infrastructure in the country shall continue to assist power utilities for these category of schemes in times to come.

Pumpset Energization

During the year 2011-12, under REC financed schemes 329022 Nos. electric irrigation pumpsets were reported to be energized. A loan assistance of Rs. 1911.42 crore were sanctioned for 149 new schemes during the year under this category.

The state-wise details and cumulative position of pumpset energized up to 31.3.2012 are given in the enclosed

Table-5.

7.4 Financing Activities in North Eastern States

A loan assistance of Rs. 519.52 crore was disbursed to North Eastern states under T&D, Generation & RGGVY programme during the financial year 2011-12. Further, 14 schemes in Nagaland were sanctioned involving a loan outlay of Rs. 9634 crore for T&D projects.

8. INTERNATIONAL COOPERATION & DEVELOPMENT

REC has signed its third loan agreement with KfW, Germany, on 30.03.2012 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.

KfW-II ODA loan of EUR 70 million (approx. Rs. 480.97 crore) was fully drawn during financial year 2011-12. Under JICA-I & II ODA loans, cumulative amounts of JPY 16356 million (approx. Rs. 778.17 crore) and JPY 9735 million (approx. Rs. 520.64 crore) respectively were drawn as on 31.03.2012 and under KfW I amount of EUR 70 million (Rs. 454.02 crore) was drawn as on 31.03.2012.

9. RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA

Government of India, launched the scheme "Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)ÃScheme of Rural Electricity Infrastructure and Household Electrification" vide OM No.44/19/2004/D(RE) dated 18th March, 2005, for providing access to electricity to all rural households. The scheme is being implemented through REC. 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. 5000 crore during X Plan period. Further sanction for continuation of the scheme in XI Plan was conveyed by Ministry of Power vide OM No.44/37/ 07-D(RE) dated 6th February, 2008 with an outlay of Rs. 28000 crore as capital subsidy.

645 projects covering electrification of 120142 un-electrified / de-electrified villages and 2.84 crore BPL households costing Rs. 40942.95 crore have been sanctioned by the Ministry of Power for implementation. The state-wise details are given in enclosed Table-6.

Cumulatively, works in 104496 un-electrified villages have been completed and connections to 1.94 crore BPL households have been provided under the scheme up to 31.03.2012. The state-wise details are given in enclosed

Table-7.

During the financial year 2011-12, it has been reported that works have been completed in 7934 un-electrified villages and connections to 3444902 BPL households have been provided. Further, during the year under review, RGGVY Subsidy of Rs. 2237.31crore was disbursed by the Ministry of Power, Government of India, to REC.

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, mini hydro, wind and solar etc. for villages where grid connectivity is either not feasible or not cost effective. Under the scheme, ninety percent capital subsidy is provided under RGGVY towards overall cost of the DDG projects under the 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 & faster implementation of DDG projects and also for facilitation of DDG in Left Wing Extremism (LWE) affected districts.

10.3 During the financial year 2011-12, in the states of Andhra Pradesh, Bihar, Madhya Pradesh and Uttar Pradesh, 234 Nos. of DDG projects were sanctioned for total project cost of Rs. 151.85 crore. 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 during 2011-12 are given below:

Sl. State No. of No. of No. of un- No. of BPL Total No. Projects Districts electrified Households sancti oned villages / covered Project Cost hamlets (Rs. in crore) covered

1. Andhra Pradesh 76 2 95 2735 21.07

2. Bihar 48 2 175 10143 37.85

3. Madhya Pradesh 48 4 170 3367 28.83

4. Uttar Pradesh 62 5 103 4821 64.10

Total 234 13 543 21066 151.85

11. MoU RATING AND AWARD

The performance of your Company in terms of Memorandum of Understanding (MoU) entered into with Ministry of Power, Government of India, for the financial year 2010-11 has been rated as "Excellent". This is the 18th year in succession that your Company has received "Excellent" rating since the year 1993-94 when the first MoU was signed with the Government. For the financial year 2011-12 also, based on the performance achieved, the Company is poised to receive "Excellent" rating.

During the year under review, your Company has received the "MoU Excellence Award for the year 2009-10" for the "Best Listed CPSE" awarded by Department of Public Enterprises, Government of India. The Award was given by Hon'ble Prime Minister of India on 31st January 2012.

12. 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) have been appointed covering 339 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 2011-12, RQMs have undertaken 2001 Nos. of materials inspections and 6316 village / substation inspections, and NQMs have undertaken 1260 Nos. of village / substation inspections for ensuring quality of works.

13. BUSINESS DEVELOPMENT

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 criteria 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 2011-12, under this policy, participants from nine such preferred customers mostly from the State Utilities viz. Punjab State Transmission Corporation Limited, Panchkula, Maharastra State Electricity Distribution Company Limited, Mumbai, Maharastra State Electricity Transmission Company Limited, Mumbai, Maharastra State Electricity Generation Company Limited, Mumbai, Damodar Valley Corporation, Kolkata, Rajasthan Rajya Vidyut Prasaran Nigam Limited and Tamil Nadu Generation & Distribution Corporation Limited, Chennai etc. were sponsored by REC for 11 day training programme on "Best Global Practices in Power Sector" held at MDI Gurgaon, India, Rome, Milan and Paris.

14. JOINT VENTURE AND ASSOCIATES

14.1 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. The total equity requirement for EESL is Rs. 190 crore to be shared equally by the four PSUs. 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.

14.2 Associate Company

Your Company has also contributed Rs. 1.25 crore (being 4.68% of paid-up capital) towards equity contribution in Indian Energy Exchange Limited (IEX) up to 31st March, 2012. The IEX has a nationwide presence in the form of electronic exchange for trading in power.

15. ERP BASED INTEGRATED INFORMATION SYSTEM

15.1 All important business functions of your Company like Central Accounting, Project Appraisal and Sanction, Disbursement and Management of Loan Accounts, Cash Management & Treasury functions etc. are done through ERP System resulting in continuous & sustainable improvement of internal efficiency and greater customer satisfaction. Data Centre is certified ISO/IEC 27001:2005 security standard, by British Standards Institution (or BSI). Towards achieving efficient e-governance and transparency, REC has implemented on- line procurement system 'E-procurement'.

15.2 As a step towards achieving paperless regime in the office, your Company has initiated project of digitization of documents by implementing Document Management System (DMS). Important divisions in Corporate Office have been brought under this system. The system is being extended to other divisions in Corporate Office, Zonal and Project offices. Up gradation of existing cold Disaster Recovery Center (DRC) to hot DRC for ERP operation has also been initiated.

16. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION

16.1 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 programmes are conducted on state-of-art subjects and subjects of importance of Power Generation, Transmission and Distribution.

16.2 National Training Programmes sponsored by Ministry of Power

CIRE is designated as a nodal agency for implementation of National Franchisee and C&D Employees Training Programmes under the Human Resources Development component of RGGVY programme. 40,000 Franchisees and 75,000 C&D Employees are to be trained under National Training Programme. During the year 2011-12, CIRE/REC entered into MoUs with 44 Power Utilities/Training Institutes, so as to implement the training programme. During 2011- 12, 431 Franchisee Programmes were conducted with 16051 participants and 1076 C&D Employee's programmes were conducted with 24782 participants. As on 31st March 12, 3204 C&D programmes covering 76793 participants and 1107 Franchisee programmes covering 40843 participants have been conducted.

16.3 Regular National Programmes

CIRE has organised 16 Regular Training Programmes with 345 participants for the personnel of various Power Utilities/ Distribution Companies, on the topics such as, Pilferage of Electricity - Technical & Legal Remedies, Construction Standards for Lines and Sub-stations in Distribution Systems, Open Access, Power Trading and Tariffs - ABT Scenario, Latest Trends in Metering, EHT Transmission Line - Design and O&M,Earthing Practices in Electrical Installations and Safety Precautions, Protection System in Sub-stations, Reactive Power Management, O&M of Thermal Generating Stations, Distribution Automation & SCADA for Power utilities, Power Purchase Agreement, EHT Sub-stations - Design, Erection, O&M, Power & Distribution Transformers - Efficient O&M, Maintenance Management of Power Distribution, Design and O&M of Hydro Power Stations.

16.4 Sponsored National Programmes

CIRE has organised 4 customised programmes and trained 113 participants. One programme was organised for the executives of Torrent Power Limited at Ahmedabad on "Earthing Practices" and three programmes were organised for the executives of Electricity Department of A&N Islands at Port Blair on "Pilferage of Electricity - Legal Remedies", "Construction Standards for Lines & Sub-stations in Distribution Systems" and "O&M of 33/11 KV Sub-stations".

16.5 Regular 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 7 International programmes with 82 participants, on the topics, viz., Business Management of Power Utilities through IT/Automated Solutions; Modernization of Power Distribution Sector, Planning and

Management of Power Transmission and Distribution System; Planning and Financial Management of Power Projects, Decentralised Distributed Generation and Rural Power Distribution Management, Best Practices in Generation and Transmission System, and Financial Management and Accounting Systems for Power Companies.

The participation was from various countries, viz., Afghanistan, Egypt, Mauritius, Nigeria, Sudan, Guatemala, Myanmar, Bangladesh, Ethiopia, Iraq, Comoros, Namibia, Uzbekistan, Tanzania, Palestine, Kazakhstan, Russia, Syria, Thailand, South Africa, Bhutan, Sri Lanka, Nepal, Yemen, Vietnam, Ghana, Zimbabwe, Philippines, Kenya, etc.

16.6 Programmes organised in collaboration

CIRE is organising training programmes in coordination with premier Management Institutes i.e., Institute of Public Enterprise and has conducted 5 programmes during the financial year 2011-12, viz. on Human Resources and Personnel Management in Power Sector, Financial Management for Power Distribution Utilities, Finance for Non- Finance Executives, Contract Management for Power Utilities and Material Management and e-Procurement with 66 participants drawn from various power utilities.

16.7 Distribution Reform, Upgrades and Management (DRUM) Programmes

CIRE is empanelled as a training institute to organise DRUM training programmes, sponsored by Ministry of Power, Government of India under the financial support of USAID, through Power Finance Corporation Limited. CIRE has organised 17 programmes most of them as offsite programs (at Utilities premises) and trained 483 participants for various power utilities in the country in different areas, 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.

16.8 R-APDRP Programme

CIRE, as partner training institute, organizes R-APDRP programme sponsored by Ministry of Power through Power Finance Corporation Limited. CIRE has conducted four R-APDRP programme on "O&M of 33/11 KV Sub-stations" with 135 participants for APDCL, APEPDCL, DHBVN and KSEB.

16.9 Conduction of National Training Programme by CIRE as Empanelled Training Institute

During the financial year 2011-12, CIRE as Empanelled Training Institute, has also conducted 49 Franchisee Programmes with 2011 participants and 7 C&D Programmes with 165 participants for various power utilities.

CIRE has also organised a training programme on "National Training Programme Web Portal" for the nodal officers of the power utilities. 22 executives from various power utilities attended the programme.

16.10 In all, during the financial year 2011-12, in addition to coordinating and monitoring the National Training Programmes for Franchisees and C&D employees, CIRE has conducted 115 programmes on various themes and trained 3485 executives as indicated below:

SL. Name of the Programme No. of No. of No. Programs Participants

1 Regular - National Programmes 16 345

2 Sponsored - National Programmes 4 113

3 Regular - International Programmes 7 82

4 Programmes in collaboration with IPE 5 66

5 DRUM Programmes sponsored by USAID 17 483

6 R-APDRP programmes sponsored by MoP/PFC 4 135

7 National Training Programme for Franchisees conducted by CIRE 49 2011

8 National Training Programme for C&D Employees conducted by CIRE 7 165

9 In-house & other Programme 6 85

Total 115 3485

17. RISK MANAGEMENT

17.1 Asset Liability Management

The Company has a Risk Management Policy which covers inter alia Asset Liability Management and Derivative Instruments. An Asset Liability Management Committee (ALCO) is currently functioning under the chairmanship of CMD and it comprises of Director (Finance), Director (Technical), Executive Director (Finance), General Managers in Finance, Generation, T&D Division and also one Part-time Non-official Independent Director, nominated by Board of Directors of the Company. ALCO monitors risk 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, like a forward looking resource raising program based on projected disbursement and maturity obligations. 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 and borrowing.

17.2 Foreign Currency Risk Management

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.

Out of total foreign currency liabilities outstanding as on 31st March 2012, 66% were fully hedged as detailed below:

Currency Total Hedged (Currency and/or Interest rate) Foreign Currency INR Equivalent Foreign Currency INR Equivalent (in million) (in crore) (in million) (in crore)

JPY 35669.38 1969.21 23144.38 1187.28

EURO 121.58 818.03 51.58 339.65

USD 1470.00 6778.29 1220.00 5499.38

CHF 200.00 1132.56 - -

Total - 10698.09 - 7026.31

Currency Unhedged

Foreign Currency INR Equivalent (in million) (in crore)

JPY 12525.00 781.93

EURO 70.00 478.38

USD 250.00 1278.91

CHF 200.00 1132.56

Total - 3671.78

17.3 Enterprise-wide Integrated Risk Management

The Company has constituted a Risk Management Committee (RMC) consisting of Director (Finance), Director (Technical) and one Part-time Non-official Independent Director for monitoring the integrated risk of the Company. The main function of RMC is to monitor various risks likely to arise and to examine 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.

18. 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. Your Company has conducted two batches of ISO 9001:2008 Ã Internal Auditors Training Programme during the year. Total number of 33 participants has successfully completed the said training programme of ISO 9001:2008.

19. HUMAN RESOURCES MANAGEMENT

In order to professionalize the Executive strength of REC and also to infuse fresh blood, 10 Executives were appointed through open advertisement and 12 Executives through campus recruitment drawn from premier Institutions empanelled for the purpose during the financial year.The total manpower of the Company as at 31.03.2012 was 678 employees which includes 432 executives and 246 Non- executives.

19.1 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 31.03.2012 are given below:

Group Total No. of SC ST employees

A 378(366) 36(32) 9(9)

B 123(137) 15(18) 3(3)

C 83(87) 15(17) 0(0)

D 94(98) 28(30) 2(2)

Total: 678(688) 94(97) 14(14)

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

19.2 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 year. Training and Human Resource Development policy of the Company aims at sharpening business skills and competence needed for better employee performance and provides all possible opportunities and support to the employees to improve their performance and productivity.

Based on the assessed needs and as a means to satisfy them, the Company sponsored 211 employees to various training programmes, workshop etc. within the country and abroad. In addition, 20 training programmes were conducted in house, which were attended by 381 employees. This included four programmes delivered by Indian Institute of Management, Lucknow on the subject of "Managerial Effectiveness and Performance Management System".

19.3 Employee Welfare and Sports Activities

Your Company has been providing a wide range of welfare amenities to employees to take care of their diverse needs with a view to ensure their commitment to the organizational objectives.

Among different activities pursued during the financial year, REC hosted14th Inter-CPSU Carrom (Men & Women) Tournament 2011-12 under the aegis of Power Sports Control Board, Ministry of Power, from 22nd to 25th November, 2011 at New Delhi and also sponsored its Teams to the Inter-CPSU (Chess / Table Tennis / Kabaddi) Tournaments 2011-12 organized by various CPSU's of Power Sector under the aegis of Power Sports Control Board, Ministry of Power.

19.4 Representation of Women Employees

Your Company provides equal growth opportunities to its women employees. Two separate Committees viz. (i) " Women Cell" and (ii) " Complaints Committee" with a representative of an N.G.O are in operation in the Company for looking after the issues concerning women employees and for ensuring safe work environment for them in the Company. REC Women Cell celebrated the "International Women's Day" on 6th March, 2012.

19.5 Industrial Relations

The Industrial Relations continued to be cordial and harmonious. Sound industrial relations are based on participative and meaningful decision making and information sharing between employees and management which help in establishment of industrial democracy in the organization. The process of participative decision making which involved consultation on important issues such as employee benefits and welfare etc. continued with REC Employee's Union and REC Officer's Association. With such robust process in place consensus was reached on majority of issues which is a true reflection of the environment of mutual trust and harmonious relations that prevails in the organization.

In tune with the participative culture which is seriously encouraged and practised in the organization, periodic interactions were held with Employee's Union and Association.

19.6 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.

20. CORPORATE SOCIAL RESPONSIBILITY POLICY

20.1 During the year, the Corporate Social Responsibility (CSR) initiatives were pursued pro-actively with a view to integrate RECs' Business operations with social responsibilities and to relate to all stakeholders meaningfully. Strategic focus was accorded by REC to this function. While identifying CSR initiatives, REC has adopted an integrated approach to address the community, societal and environmental concerns.

CSR Budget @ 0.5% of Profit After Tax (PAT) was allocated for financial year 2011-12, amounting to Rs. 12.85 crore. Viable and sustainable CSR projects were identified and sanctioned assistance aggregating to Rs. 14.10 crore. Disbursement of an amount of Rs. 12.99 crore has been achieved during the financial year 2011-12 against the MoU target of Rs. 12.85 crore, thereby achieving the targets set under excellent category for CSR initiatives.

The following project based CSR activities were initiated during financial year 2011-12 based on base-line surveys and need assessment.

(i) Support of Rs. 10.50 crore to implement a prestigious programme entitled "Saakshar Bharat Mission" of the Government of India by National Literacy Mission Authority (NLMA) under MoHRD in Public Private Partnership (PPP) mode was provided to six identified States with low literacy percentage. Over 1.61 lakh Nos. Adult Education Centres (AECs) are targeted to be set up under Saakshar Bharat Mission in these States. It has been decided to upgrade the existing Adult Education Centres (AECs) into Model AECs by providing them with ICT infrastructure viz. computers, furniture and audio visual equipment etc. In line with CSR vision and REC CSR policy to promote education including infrastructure creation, your Company had sanctioned up-gradation of 220 AECs in rural locations @ Rs. 2.5 lakh per AEC thus creating a platform/hub in the rural areas enabling the literates to attend the various educational programmes to achieve higher skills and thus leading to creation of livelihood opportunities and employment in urban areas and 100 new MAECs cum vocational training centres to be set up by State Resource Centres (SRCs) in rural areas /district headquarters @ Rs. 5 lakh each thus establishing an educational hub for both illiterates and literates to acquire higher skills by attending various educational programmes thus leading to creation of livelihood opportunities and employment in urban areas.

(ii) Financial support of Rs. 1.63 crore was provided to Dr. Reddy Foundation the CSR arm of Dr. Reddy Laboratories Hyderabad, for skills up-gradation and job oriented training leading to creation of livelihood opportunities and employment to 2400 rural/ semi urban youths from economically weaker section at 15 centres located in 6 states viz. Odisha, Jharkhand, Chhattisgarh, Bihar, West Bengal and Uttar Pradesh.

(iii) Financial assistance of Rs. 1.53 crore was provided to Construction Industry Development Council (CIDC), an autonomous body established by Planning Commission, Government of India, for skills up-gradation and job oriented training leading to creation of livelihood opportunities and employment to 500 rural/ semi urban youths from economically weaker section of society in construction industry at designated training centres viz. Faridabad (Haryana), Ghaziabad, Sidhauli & Ramshahpur in Uttar Pradesh and Pavpuri in Bihar States.

(iv) Further recognition was given to National Men's Hockey team by awarding them @ Rs. 1.5 lakh per player for winning Asian Championship Trophy 2011 and @ Rs. 1.0 lakh per player for qualifying for London Olympics, 2012. This CSR initiative "Promotion of Talent in Sports" was identified and undertaken to raise their morale to bring our National game Hockey to shining glories in future.

Concurrent and final evaluation of all CSR projects initiated during financial year 2010-11 is being perused actively by engaging an external agency during financial year 2011-12 in compliance with DPE Guidelines.

Shri Rajeev Sharma, CMD, REC (right), signing MoU with Shri Jagmohan Singh Raju, CEO, National Literacy Mission Authority (left), in the presence of Shri Kapil Sibbal, Hon'ble Minister for Education, on 13th March 2012, for providing REC-CSR support for the "Saakshar Bharat Abhiyaan" of the Government of India.

21. INTERNAL CONTROL SYSTEM AND ITS ADEQUACY

The Company maintains system of Internal Control including suitable monitoring procedures which ensures accurate and timely financial reporting of various transactions, efficiency of operations and compliance with statutory laws, regulations and Company policies. In order to ensure that adequate checks and balances are in place and that all internal control systems are in order, regular and exhaustive Internal Audit of various Divisions / offices are conducted by In-house

Internal Audit Division and for some selected Project Offices by experienced firms of Chartered Accountants. The Internal Audit Division covers all the major areas of operations including identified critical / risk areas as per the Annual Internal Audit Programme. Audit Committee periodically reviews the significant findings of different Audits as prescribed under the Companies Act and in the Listing Agreement.

22. VIGILANCE ACTIVITIES

22.1 The Vigilance Division continued its efforts to enhance transparency and accountability in the systems and procedures. Towards this purpose, regular meetings were conducted with functional divisions to identify the areas which needed to be streamlined. REC's CDA Rules were reviewed and revised to make them more comprehensive. Recruitment process has been made more transparent by HR Division by putting requisite details on the website of the Company at various stages of the recruitment process like advertisement, eligibility criteria, details of applicants, shortlisted candidates, date and time of interview, results etc. The Company has also introduced IT based Bill Tracking System so as to process the bills of third parties on First in First Out basis. This will also facilitate third parties to track their bills on Website of the Company. Status of loan applications received in the Company for various categories i.e. Generation and T&D are uploaded on Company's website to facilitate the borrowers to know the status of their loan proposals. The Leveraging of IT Technology (ERP) has resulted in availability of on-line secure information and improved response time to customers, leading to their satisfaction and reduction in average disbursement period.

22.2 Policy for Investor/Debt Servicing mechanism and Resource Mobilisation are under finalization and modalities/procedure adopted in raising External Commercial Borrowing were also reviewed and suggestions for making the operations more transparent for appointment of external agencies i.e., Arrangers, Managers, Fiscal Agents etc. were made. All HoDs/ CEOs-RECPDCL/RECTPCL have been advised to comply with the Centralised Complaint Handling system and ensure that complaints received in various divisions are sent to Vigilance Division.

22.3 E-procurement has been implemented for procurement above Rs. 10 lakh in the Company. In view of CVC/MoP's instructions, the Procurement guidelines are revised and made more comprehensive by prescribing specific timelines for each step under different tendering procedures. In addition to this, computerization of Annual Immovable Property Returns (IPRs) has been done and employees entered details of movable/immovable property online which were subjected to systematic scrutiny and clarifications were sought wherever necessary. As per directions of MoP the details of Immovable Property of all the Executives of the Company have been uploaded on website of the Company and vigilance clearance has been linked with timely submission of IPR.

22.4 Inspections and field visits were regularly conducted by the Vigilance Division. Audit Reports were scrutinized from vigilance point of view. Training programmes were also organized for vigilance and non-vigilance officers at Corporate Office as well as field offices on vigilance related matters. Agreed lists and list of Officers of Doubtful Integrity are finalized. In compliance to the instructions of CVC, the sensitive posts in the Corporation were identified, and most of the officers working on these posts for a long time have been rotated. Prescribed periodical statistical returns were sent to CVC, CBI, MoP on time.

22.5 The Vigilance Awareness Week was observed from 31st October, 2011 to 5th November, 2011. During this period, posters containing messages discouraging corruption and encouraging preventive vigilance were got displayed at Corporate Office as well as Zonal / Project Offices. Debate and Essay Writing Competitions were organized for executives as well as non-executives. Eminent faculty was also invited for delivering lectures on various important topics, which included focus on participative vigilance through all stakeholders' involvement. 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.

23. IMPLEMENTATION OF OFFICIAL LANGUAGE

23.1 The Company excelled most of the targets fixed by Department of Official Language, Ministry of Home Affairs in its Annual Programme 2011-12. In order to encourage employees, all incentive Schemes introduced by the Government of India have been implemented in the Company. During the year, Officers and Staff of the Company have shown keen interest in Hindi with the result that its usage has increased in day to day working.

23.2 An "Akhil Bhartiya Rajbhasha Sammelan" was organized by the Company at New Delhi under the aegis of "Ministry of Power" on 16th May, 2011 which was inaugurated by Hon'ble Union Minister of Power, Shri Sushilkumar Shinde. A large number of MPs and senior officers of Ministry of Power, Famous Hindi scholars and CMD of other PSUs under the administrative control of Ministry of Power also attended.

23.3 The Company has been honoured with RAJBHASHA SHRI SAMMAN by Bhartiya Rajbhasha Vikas Sansthan, Dehradun during the year 2011-12 for promoting Rajbhasha.

23.4 During the year, inspections were carried out to assess the progressive use of Hindi in 11 Divisions of Corporate Office/ 12 Project Offices and suggestions were given to them to improve the shortcomings. Ministry of Power's officers have also inspected two Project Offices during the year. A target of 25% inspection of Divisions of Corporate Office and Project Offices was set out in the Annual Programme 2011-12 by Official Language Department. Against this, the Company has achieved twice the target of inspections at Corporate Office as well as Project Office. Hindi pakhwara was also organized from14.09.2011 to 28.09.2011.

23.5 Four quarterly review meetings of Official Language implementation Committee were held during the year 2011-12 under the chairmanship of CMD in which detailed discussion were held to review the progress and suggest measures to overcome the difficulties in order to achieve the targets.

23.6 The website of the Company is maintained both in Hindi and English and is being updated from time to time. Bilingual working facility has been made available on all computers. All publications, reports, memorandum, press release, 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.

24. 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. 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, the financial data of the subsidiaries has been furnished in the Notes on consolidated financial statements, which forms part of the Annual Report. The annual accounts of the Company including that of 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.

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

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.

No export activities/initiatives were carried out and no foreign exchange was earned during the financial year 2011-12. The particulars regarding foreign exchange outgo during the year are as under:

(Rs. in crore)

Particulars Amount

Royalty, Know-how, Professional Consultation Fees 1.34

Interest 192.95

Finance Charges 65.45

Other Expenses 0.69

Total 260.43

26. SUBSIDIARY COMPANIES

Your Company has four subsidiary companies as on March 31, 2012 for undertaking specific business activities. The names of these companies, dates of their formation and the percentage of ownership interest in these Companies are as follows:-

Sl. Name of Date of Percentage No. Subsidiary Formation of o

Mar 31, 2011

The Shareholders,

The Directors have pleasure in presenting the Forty Second Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2011.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the financial year 2010-11 were as under with comparison of previous year's performance:-

2010-11 2009-10

Parameter (Rs. in crore) (Rs. in crore)

Loans sanctioned 66419.98 45357.36

(excluding subsidy under RGGVY)

Disbursements 28517.11 27127.14

(including subsidy under RGGVY)

Recoveries (including interest) 16951.31 12496.12

Total Operating Income 8256.91 6549.76

Profit before tax 3476.63 2649.19

Profit after tax 2569.93 2001.42

1.2 Financial Performance

The total operating income of the Company for the year increased by 26.06% to Rs.8256.91 crore from Rs.6549.76 crore during the previous year. The profit before tax increased by 31.23% to Rs.3476.63 crore from Rs.2649.19 crore for the previous year and the profit after tax increased by 28.40% to Rs.2569.93 crore from Rs.2001.42 crore for the previous year.

1.3 Dividend

In addition to interim dividend of Rs.3.50 per share paid in February, 2011, your Directors are happy to recommend a final dividend of Rs.4.00 per share for the year 2010-11, which is subject to approval

Dr. J.M. Phatak, CMD, REC, presenting a cheque of Rs.230.86 crore to Shri Sushilkumar Shinde, Hon'ble Union Minister of Power on 23rd September, 2010 in presence of Shri P. Uma Shankar, Secretary (Power), senior Officials of Ministry of Power and REC. of shareholders in the Annual General Meeting. The total dividend for the year will work out to Rs.7.50 per share as against Rs.6.50 per share paid last year. The total dividend pay-out for the year will amount to Rs.740.59 crore (excluding dividend tax).

1.4 Share Capital

The Issued and Paid up Share Capital is Rs.987.46 crore consisting of 98,74,59,000 equity shares of Rs.10 each as on 31.03.2011 against the Authorized Capital of Rs.1200 crore. The Government of India holds 66.80% of the equity share paid up capital.

2. LOANS SANCTIONED

The Company sanctioned loans worth Rs.66419.98 crore during the year 2010-11, as against Rs.45357.36 crore in the previous year excluding subsidy under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). The state and category-wise break-up of loans sanctioned during the year are given in enclosed table-1 and 2 respectively. The cumulative amount of sanctions made since inception upto 31.3.2011 was Rs.345906.22 crore including subsidy under RGGVY. The cumulative state-wise position of sanctions up to the end of 2010-11 is given in enclosed table-3.

3. DISBURSEMENTS

A total sum of Rs.28517.11 crore was disbursed during the year 2010-11 as against Rs.27127.14 crore in the previous year including subsidy under RGGVY. The cumulative amount disbursed since inception upto 31.3.2011 was Rs.138052.41 crore excluding subsidy under RGGVY. The state-wise disbursements and repayment by borrowers during the year together with cumulative figures and outstandings as on 31.3.2011 are given in enclosed table-4.

4. RECOVERIES

4.1 The amount due for recovery including interest during the year 2010-11 was Rs.16979.84 crore as compared to Rs.12461.02 crore during the previous year. The overdues from defaulting borrowers were Rs.195.13 crore as on 31.3.2011. The Company recovered a total sum of Rs.16951.31 crore during the year 2010-11 against Rs.12496.12 crore during the previous year. The details are given below:

Total Particulars (Rs. in crore)

Overdues as on 1.4.2010 166.60

Dues receivable during the year 16979.84

Received during the year 16951.31

Overdues as on 31.03.2011 195.13

4.2 Out of the overdues of Rs.195.13 crore as on 31.03.2011, a sum of Rs.55.58 crore stands recovered till 31.05.2011.

4.3 The Company has been making continuous efforts to keep Non- Performing Assets (NPAs) to Zero level. As on 31.03.2011, the Gross NPAs of the Company stood at Rs.19.54 crore (i.e. 0.02% of Gross Loan Assets), as compared to Rs.19.54 crore (0.03% of Gross Loan Assets) as on 31.03.2010.

5. FINANCIAL REVIEW

5.1 a summary of financial results

The summary of financial results of the Company for the year ended 31st March, 2011 is given below:

(Rs. in crore)

Particulars Standalone Consolidated

2010-11 2009-10 2010-11 2009-10

Gross Income 8495.27 6707.60 8532.20 6747.63

Profit before tax 3476.63 2649.19 3499.16 2680.76

Depreciation 3.04 2.16 3.07 2.18

Provision for Income Tax , 906.70 647.77 914.26 658.51

Deferred Tax & FBT Net Profit / Profit after Tax 2569.93 2001.42 2584.89 2022.25

Add: Reversal of Deferred Tax Liability for earlier - 325.77 - 325.77 years

Total amount available 2569.93 2327.19 2584.89 2348.02 for appropriations appropriations :

Transfer to Special Reserve u/s 36(1) (viii) of 610.11 458.03 610.11 458.03 the Income Tax Act, 1961

Transfer to Reserve for Bad & Doubtful Debts u/s 144.09 107.60 144.09 107.60 36(1)(viia) of the Income Tax Act, 1961

Interim Dividend 345.61 257.60 345.61 257.60 Dividend Tax on Interim 57.39 43.77 57.39 43.77

Dividend Proposed Final Dividend 394.98 345.61 395.03 345.66

Dividend Tax on 64.08 57.40 64.08 57.41 proposed Final Dividend

Transfer to Reserve for - - 0.20 - Doubtful Debts

Transfer to General 260.00 500.00 263.00 500.75 Reserve

Balance carried forward 693.67 557.17 705.37 577.20

5.2 Resource Mobilization

The Company mobilized Rs.25855.35 crore from the market during the year 2010-11. This includes Rs.2750 crore by way of loan from commercial banks and FI, Rs.5045.47 crore by way of capital gain tax exemption bonds, Rs.217.16 crore from infrastructure bonds under Section 80CCF of Income Tax Act, 1961, Rs.10169.78 crore by way of non-priority sector bonds, Rs.1600 crore through Commercial Paper(CP), Rs.375 crore by way of Short Term Loan from Commercial Banks, Rs.5308.87 crore from external commercial borrowings and Rs.389.07 crore by way of Official Development Assistance (ODA) loan from Kreditanstat fur Wiederaufbau (KfW), Germany & Japan International Cooperation Agency (JICA), Japan.

External Commercial Borrowings

The Company mobilized USD 1170 million (Rs.5308.87 crore) from International market during FY 2010-11. Out of the above, USD 500 million was raised through Reg S Bond and USD 670 million through syndicated Term Loan facilities.

Cash Credit facilities

For day to day operations, the Company has an approved limit of Rs.1200 crore to arrange cash credit limits which has been tied up with various banks.

5.3 domestic and international Credit rating

Domestic

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

International

REC 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. "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

As per the Finance Act 2006, only REC and National Highway Authority of India (NHAI) are eligible to raise money through bonds issued under Section 54 EC of the Income Tax Act, 1961, which helped in keeping the cost of borrowing at a low level. The overall annualized average cost of funds was 6.90 % during the year 2010-11. As a result REC is able to deliver debt financing at competitive rates.

5.5 Redemption and Pre-Payment

During the year, the Company repaid a sum of Rs.11665.05 crore. This includes repayment amounting to Rs.13.29 crore to the Government of India, Rs.1200.22 crore to non-priority / priority sector bond holders, Rs.3871.21 crore worth of Capital Gain Tax Exemption Bonds and Rs.83.09 crore of Official Development Assistance (ODA) loan. The Company also redeemed long term and short term loans from Banks of Rs.2447.24 crore and Commercial Paper of Rs.4050 crore.

5.6 Financial status at the close of the financial year

At the close of the financial year 2010-11, the total resources of the Company stood at Rs.82792.44 crore. Out of this sum, Equity Share Capital contributed Rs.987.46 crore, Reserve and Surplus stood at Rs.11801.16 crore, Loans from LIC, Commercial Banks and Market Borrowings accounted for Rs.70003.82 crore. These funds were deployed as Long / Short Term Loans of Rs.82132.06 crore and Fixed Assets of Rs.88.06 crore (including Capital Work in progress), Investments of Rs.812.43 crore, Deferred Tax Asset of Rs.12.77 crore and balance of Rs.252.88 crore in Net Current Assets.

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.

In spite of growing competition in the market as well as concerns on account of factors like high government borrowings, increase in RBI policy rates, rise in inflation etc., your Company has been able to maintain healthy spreads balancing its objectives of business growth and profitability during the year.

6. RECOGNITION, AWARDS AND ACHIEVEMENTS

6.1 REC gets 'Infrastructure Finance Company' (IFC) status

We have the pleasure to inform that on an application made by the Company, Reserve Bank of India (RBI) vide its letter dated September 17, 2010 categorized your Company as an Infrastructure Finance Company (IFC). With IFC Status, REC can now take an additional lending exposure of up to 5% of its owned funds in case of a single borrower as well as up to 10% of its owned funds in case of a single group of borrowers. The total permissible exposures would thus be 40% of owned funds in case of single group of borrowers. In addition, REC becomes eligible for issuance of Infrastructure Bonds and for raising funds up to USD 500 million through External Commercial Borrowing (ECB) in a year under automatic route.

6.2 Awards and Achievements

During the year under review, performance of your Company has been recognised by way of bestowing the following prestigious awards /accolades:

(i) Gold Trophy of SCOPE Meritorious Award for "The Best Managed Bank, Financial Institution or Insurance Company 2008-09". The award was given by Hon'ble President of India on 10th April, 2010. The award is instituted by SCOPE in recognition of the outstanding performance of PSUs in specific field.

(ii) DSIJ PSU Award 2010 for "The Best Wealth Creator" by Dalal Street Investment Journal (DSIJ).

(iii) India Pride Award 2010 for "The Best NBFC" instituted by Dainik Bhaskar DNA group. The award is given for excellent performance of PSUs.

(iv) Asia Pacific HRM Congress Award 2010 for "Organisational Development & Leadership". The award is given under the aegis of Asia Pacifc HRM Congress.

(v) DSIJ PSU Award 2011- "Speed King" for fastest growing PSUs across Maharatnas, Navratnas & Miniratnas.

(vi) Featured in Dun & Bradstreet's India's Top PSUs 2011.

Hon'ble Union Minister of Finance Shri Pranab Mukherjee giving away the india pride award 2010 - "the Best NBfC" for excellent performance of PSUs instituted by Dainik Bhaskar DNA Group, to Shri Hari Das Khunteta, Director (Finance), REC

Hon'ble Union Minister for Power Shri Sushikumar Shinde giving away the 3rd dsij psu award 2011-"speed king" for fastest growing PSUs across Maharatnas, Navratans & Miniratanas, to Shri Hari Das Khunteta, CMD on behalf of REC, on 21st April, 2011

7. MOU WITH MINISTRY OF POWER

The performance of REC in terms of Memorandum of Understanding (MoU) signed with Ministry of Power, Government of India for the financial year 2009-10 has been rated as "Excellent". This is the 17th 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 2010-11 also, based on the performance achieved, the Company is poised to receive "Excellent" rating.

8. FINANCING ACTIVITIES

REC has been funding power generation, transmission & distribution projects besides for electrification of villages. Various initiatives in this regard are enumerated below:

8.1 Generation

During the year 2010-11, the Company sanctioned 34 nos. of generation / R&M loans including 10 nos. additional loan assistance with total financial outlay of Rs.40101 crore including consortium financing with other financial institutions. Since 2002-03 and upto 31.3.2011, REC has sanctioned financial assistance of Rs.143904.76 crore for R&M, thermal, wind and hydro generation projects. REC has disbursed Rs.11753.92 crore during 2010-11 against the ongoing generation projects.

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

Particulars No. of loans Loan amount (Rs. in crore) STATE SECTOR

Fresh Loan 7 19680.87

Additional Loan 3

PRIVATE SECTOR

Fresh Loan 17 20420.13

Additional loan 7

Total : Fresh Loan Additional 24 10 = 34 40101.00 Loan

8.2 Renewable Energy (RE)

During the year 2010-11, 11 nos. Renewable Energy projects including 6 nos. Solar projects were sanctioned with total project cost of Rs.621.06 crore and loan assistance of Rs.390.71 crore.

8.3 Transmission & Distribution

REC 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 country's objective to provide power for all by the year 2012 and also reduce the AT&C losses, REC has been financing schemes for expansion and strengthening of the transmission network and more importantly, modernizing of the distribution system.

During the year 2010-11, REC sanctioned 569 nos. of Transmission and Distribution schemes involving a total loan assistance of Rs.22009.13 crore. This includes primary power evacuation schemes associated with generating plants, system improvement schemes including R-APDRP projects, bulk loan schemes, intensive electrification schemes and pumpset energisation schemes. The state-wise and category-wise details of the schemes are as per table 1 & 2 respectively.

Shri P. J. Thakkar, Executive Director, REC receiving "india power awards 2010" at a function organised by Council of Power Utilities on 11th November, 2010 for the availability of electricity for accelerated growth and enrichment of quality of life of rural & semi urban population.

8.4 System Improvement & Bulk Loan

During the year 2010-11, a total of 480 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs.20298.36 crore. This included: (i) 62 schemes involving a loan assistance of Rs.1554.26 crore for financing investment in the distribution system by way of installation of essential equipments like transformers, meters, capacitors etc. (ii) 30 schemes involving a loan assistance of Rs.1940.09 crore for conversion of Low Voltage Distribution to High Voltage Distribution System (HVDS), (iii) 221 schemes for Rs.6531.59 crore for improving the distribution system, and (iv) 72 schemes for Rs.1017.26 crore towards counterpart funding of Part-B of R-APDRP projects and (v) 95 schemes for loan assistance of Rs.9255.17 crore for improving the transmission network.

8.5 Pumpset Energization

During the year 2010-11, 318176 electric irrigation pumpsets were reported energized under REC financed schemes. 76 new schemes for a loan assistance of Rs.1562.55 crore were sanctioned during the year under this category. The state-wise details and cumulative position up to 31.3.2011 are given in the enclosed table-5.

8.6 activities in North eastern (Ne) states

A loan assistance of Rs.17.78 crore was disbursed to the NE states under T&D programme during the year 2010-11.

Loan assistance of Rs.7.14 crore was sanctioned to Department of Hydro Power Development, Govt. of Arunachal Pradesh for setting up of one micro hydel project.

9. RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA (RGGVY)

Government of India, launched the scheme "Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)ÃScheme of Rural Electricity Infrastructure and Household Electrification" vide OM No.44/19/2004/D(RE) dated 18th March, 2005, for providing access to electricity to all rural households. The scheme is being implemented through REC. Under the scheme, 90% capital subsidy is being provided by Govt. of India for overall cost of the projects.

9.1 Electrification Of Villages And Bpl Households

Initial approval was for implementation of Phase I of the scheme for capital subsidy of Rs.5000 crore during X Plan period. Further sanction for continuation of the scheme in XI Plan was conveyed by Ministry of Power vide OM No.44/37/07-D(RE) dated 6th February, 2008 with an outlay of Rs.28000 crore as capital subsidy.

573 Projects Covering Electrification Of 118499 Un-Electrified Villages (Provisional revised coverage 111062) and 2.46 crore BPL households (Provisional revised coverage 2.33 crore) costing Rs.26349.03 crore have been sanctioned by the Ministry of Power for implementation. The state-wise details are furnished in

Table-6.

Cumulatively, under the scheme works in 96562 un-Electrified villages have been completed and connections to 1.598 crore BPL households have been provided under the scheme up to 31.03.2011. The state-wise details are furnished in table-7.

During 2010-11, it has been reported that works have been completed in 18306 un-Electrified villages and connections to 0.588 crore BPL households have been provided. The state-wise details are furnished in table-7. Further, during the year under review, RGGVY Subsidy of Rs.5000 crore was disbursed by the Ministry of Power, GoI, to REC.

10. RGGVY- DECENTRALISED DISTRIBUTED GENERATION (DDG)

10.1 RGGVY provides for DDG projects from conventional or renewable non-conventional sources such as biomass, biogas, mini hydro, wind and solar etc. for villages where grid connectivity is either not feasible or not cost effective.

10.2 DDG Systems are small power generation units near the load centres.

10.3 Ninety percent capital subsidy is provided under RGGVY towards overall cost of the DDG projects under the 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.

10.4 A provision of Rs.540 crore has been kept as subsidy for DDG projects under XI Plan.

10.5 The Guidelines for DDG projects under RGGVY have been issued by Ministry of Power 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 & faster implementation of DDG projects and also for facilitation of DDG in Lefit Wing Extremism (LWE) affected districts.

10.6 29 nos. DDG projects were sanctioned during FY 2010-11 in the states of West Bengal, Chhattisgarh and Uttarakhand for a total project cost of Rs.112.58 crore. Most of the States have appointed implementing agencies for DDG projects and are in the process of preparation of DPRs for DDG projects.

11. CONTRIBUTION OF REC IN PROMOTION OF RENEWABLE/DDG PROJECTS

The Company till 31.3.2011 has financed various Renewable Projects as per details given below:

sl. Description Projects Projects Total No. under imple- Commis- mentation sioned

Value of Loan (i) 1895.29 132.96 2028.25 sanctioned (Rs. crore)

Disbursement made (ii) 397.67 126.10 523.77 so far (Rs. crore)

Value of Projects (iii) 2717.11 378.61 3095.72 Sanctioned (Rs. crore)

(iv) MW of Projects 389.60 61.46 451.06

(v) No. of Projects 23 11 34

12. STANDARDISATION, QUALITY CONTROL & MONITORING

The 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 and has recently issued / updated technical specifications on Insulation Piercing Connectors for LT Aerial Bunched Cables of Voltage upto 1100 volts and Anchor (Dead end) and Suspension Assemblies for LT Aerial Bunched Cables of working voltage upto and including 1100 volts.

12.1 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) have been appointed covering 338 projects in 25 states and (ii) National Quality Monitors (NQMs) have been appointed under Tier-III for the 332 projects covering 24 states of country. Further during the year under review, RQMs have undertaken 528 Nos.

of materials inspections and 5634 village inspections, and NQMs have undertaken 729 Nos. of village inspections for ensuring quality of works.

13. ENERGY EFFICIENCY SERVICES LIMITED (EESL)

REC along with three other PSUs namely Powergrid, NTPC, and PFC as equal partners has formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL) on December 10, 2009. The total equity requirement for EESL is Rs.190 crore to be shared equally by the four PSUs. 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.

13.1 Indian Energy Exchange Limited (IEX)

Your Company has also contributed Rs.1.25 crore (being 4.68 % of paid-up capital) towards equity contribution in Indian Energy Exchange Limited (IEX) up to 31st March, 2011. The IEX has a nationwide presence in the form of electronic exchange for trading in power.

14. INTERNATIONAL COOPERATION & DEVELOPMENT

14.1 Japan International Cooperation Agency (JICA)

REC has 2 Nos. of ongoing ODA loans from Japan International Cooperation Agency (JICA) Ã (JICA-I & II of JPY 20629 million and JPY 20902 million respectively) and 2 nos. ODA loans from KfW (KfW-I & II of EURO 70 million each). JICA-I loan is towards Rural Electricity Distribution Backbone (REDB) projects being implemented in the states of Andhra Pradesh, Madhya Pradesh and Maharashtra. JICA-II loan is towards "Transmission System" projects being implemented in the state of Haryana. KfW-I loan is towards "Energy Efficiency Programme" on HVDS projects being implemented in the state of Andhra Pradesh. KfW-II loan is towards "Energy Efficiency Programme" on HVDS projects being implemented in the state of Haryana. Under JICA-I&II ODA loans, a cumulative amount of JPY 15673.01 million and JPY 8142.81 million respectively has been drawn as on 31.03.2011. The drawal under KfW-I ODA loan was completed fully during the year under review and drawal under KfW-II ODA loan is yet to start.

15. ERP BASED INTEGRATED INFORMATION SYSTEM

15.1 ERP in REC has been operational since 24th July 2009, and covers all important business areas of REC like Central Accounting, Project Appraisal and sanction, disbursement and management of Loan Accounts, Cash Management & Treasury functions, payroll and purchases etc. This enables capturing of data and information at the point of origin across all Offices of REC and flow of the same upto the appropriate level depending on the defined workflow hierarchy, resulting in improvement of internal efficiency and greater customer satisfaction.

15.2 REC Data Centre along with support functions comprising of IT, HR, Legal, Administration and Finance has been certified the global ISO/IEC 27001:2005 security standard, by BSI Management Systems India Private Limited. A Centralized helpdesk with state- of-the-art HelpDesk sofitware system has also been established to streamline and improve the IT support across REC.

15.3 REC's bilingual website (www.recindia.gov.in) was adjudged as the best Hindi website by the ÃNA.RA.KA.S' for the past consecutive three years.

15.4 Towards achieving greater e-governance and transparency, REC has implemented applications like Ãe-procurement' and web-based online flling of ÃAnnual Property Return'. Presently, all tenders of above Rs.10 lakh are procured through e-tendering system. The ÃAnnual Property Return' System is being used by all employees across REC for on-line submission of Annual Property Return and intimation as per statutory requirements.

15.5 With the implementation of ERP, more desks have been provided with Computer Systems. The present population of desktop systems against total employees stands around 90% (excluding class IV employees).

16. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION (CIRE)

16.1 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 organizations concerned with Power and Energy. CIRE conducts regular training programmes on various aspects of Generation, Transmission and Distribution for National and International Power Sector Executives.

16.2 National Training Programmes Sponsored By Mop

CIRE is designated as a nodal agency for implementation of National Franchisee and Training Programmes for employees of C&D category under the Human Resources Development component of RGGVY programme. 40000 Franchisees and 75000 employees of C&D category are to be trained under National Training Programme (NTP). This training activity will continue upto March, 2012. CIRE has entered into MoUs with 42 Power Utilities, so as to implement the training programme. During the year 2010-11, 472 Franchisee Programmes were conducted with 16770 participants and 1372 programmes for employees of C&D category were conducted with 32383 participants by various utilities across the country. The cumulative figure of personnel trained under Franchisee Training programme and C&D training stand at 26119 and 50256 respectively till March, 2011.

16.3 Regular National Programmes

CIRE during the year under review, has organised 16 Regular Training Programmes with 251 participants for the personnel of various Power Utilities/Distribution Companies, on the topics such as, Distribution Automation & SCADA for Power utilities; Power & Distribution Transformers ÃModern Trends and Practices; Earthing Practices in Electrical Installations and Safety Precautions; EHT Sub-stations Ã Design, Operation & Maintenance; EHV Transmission Lines - Design, Operation & Maintenance; Open Access, Power Trading and Tariffs - ABT

Scenario; Maintenance Management in Distribution; Reactive Power Management; Customer Management including procedures for ISO certification; Power Sector Accounting; Power Purchase Agreement; REC Standards for Construction, and Specifications for Materials; Operation & Maintenance of Generating Stations; Pilferage of Electricity - Technical & Legal Remedies; Appraisal and Financing of Power Projects; and 33/11 KV Sub-Station protection.

16.4 Sponsored National Programmes

CIRE has also organised 3 customised programmes and trained 94 participants, with two programmes being on Pilferage of Electricity and Legal Remedies for the Vigilance / Police Officers / Executives of Karnataka Power Utilities and One on Reactive Power Management for the Officers of Narmada Hydro Power Development Corporation.

16.5 Regular International Programmes

CIRE is empanelled by Ministry of External Aaffairs, Govt. of India to organise training programmes in the area of power sector under ITEC/SCAAP. During the year, CIRE has organised 7 International programmes with 117 participants, on the topics, viz., Modern Practices in Generation and Transmission Systems; Financial Management and Accounting System for Power Companies; Planning and Management of Power Transmission and Distribution Systems; Business Management of Power Utilities through IT/Automated Solutions; Modernization of Power Distribution Sector; Decentralized Distributed Generation and Rural Power Distribution Management and Planning and Financial Management of Power Projects. The participation was from countries, viz., Afghanistan, Angola, Belarus, Bhutan, Cambodia, Egypt, Ethiopia, Ghana, Guyana, Honduras, Indonesia, Iraq, Kenya, Laos, Lesotho, Madagascar, Mauritius, Malawi, Myanmar, Nepal, Nigeria, Oman, Philippines, Samoa, Sudan, Sri Lanka, Syria, Tanzania, Tajikistan, Thailand, Zambia and Zimbabwe.

16.6 Sponsored International Programmes

Three programmes were sponsored by USAID/SARI(Energy) for the capacity building of power sector executives of Afghanistan on Skill Based Development Programme on Transformers; Distribution Loss Reduction and on Protection Systems and CIRE trained 35 participants with Industries tie-ups for hands-on experience. Further, a 3-week customised programme on Solar Power Generation with 10 participants was organised for Arab Organisation for Industrialisation (AOI) Cairo, Egypt.

16.7 Programmes Organised In Collaboration

CIRE is also organising training programmes jointly with a premier Management Institute i.e. Institute of Public Enterprise and during the year conducted 4 programmes viz. Human Resources and Personnel Management in Power Sector; Strategic Financial Management for Power Sector; Finance for Non-Finance Executives and Appraisal and Financing of Power Projects with 51 participants drawn from various power utilities.

16.8 Drum Programmes

CIRE is empanelled as a partner training institute to organise DRUM training programmes, sponsored by Ministry of Power, Govt. of India under the financial support of USAID, through

Power Finance Corporation. CIRE has organised 31 programmes most of them are offsite programs (at Utilities premises) and trained 878 participants for 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 Morale Development; Disaster Management, Electrical Safety Procedures and Accident Prevention, Financial Management in Distribution Business and TOT - Rural Distribution Franchising.

16.9 R-APDRP Programme

R-APDRP programme is sponsored by Ministry of Power, through PFC. CIRE conducted one R-APDRP programme for 63 Linemen of Haryana State Utility at Hisar during the year.

16.10 Conducting Of Ntp Programmes By Cire As Empanelled Training Institute

During the year 2010-11, CIRE as Empanelled Training Institute of NTP Programmes has conducted 31 Franchisee Programmes with 1,260 participants and 16 C&D Programmes with 401 participants.

16.11 in-house programmes

Four programmes and two workshops with 104 participants were organised for the employees of REC to upgrade their knowledge and skills on various topics.

16.12 In all, during the year 2010-11, in addition to coordinating and monitoring the National Training Programmes for Franchisees and employees of C&D category, CIRE conducted 119 programmes and trained 3264 executives as indicated below:

Sl.No. Name of the programme No. of programmes No. of participants

1 Regular - National Programmes 16 251

2 Sponsored - National Programmes 3 94

3 Regular - International Programmes 7 117

4 Sponsored - International Programmes 4 45

5 Programmes in collaboration with IPE 4 51

6 DRUM Programmes sponsored by USAID 31 878

7 R-APDRP programmes sponsored by MoP/PFC 1 63

8 National Training Programme for Franchisees conducted by CIRE 31 1260

9 National Training Programme for employees of C&D category conducted by CIRE 16 401

10 In-house Programmes 6 104

Total 119 3264

17. RISK MANAGEMENT

17.1 Asset Liability Management

The Company has a Risk Management Policy which covers inter alia Asset Liability Management and Derivative Instruments. An Asset Liability Management Committee (ALCO) is currently functioning under the chairmanship of CMD and it comprises of Director (Finance), Director (Technical), Executive Director (Finance), General Managers in Finance, Generation, T&D Division and also one Part-time Non-Official Independent Director, nominated by Board of Directors of REC. ALCO monitors risk 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, like a forward looking resource raising program based on projected disbursement and maturity obligations. The interest rate risk is monitored through interest rate sensitivity analysis and managed through review of lending rates and cost of borrowings and the terms of lending and borrowing. Maturity pattern of certain items of Asset and Liabilities based on Balance Sheet as on 31st March, 2011, is as under:

17.2 Foreign Currency Risk Management

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.

17.3 Enterprise-Wide Integrated Risk Management

The Company has constituted a Risk Management Committee (RMC) consisting of Director (Finance), Director (Technical) and one Part-time Non-Official Independent Director for managing the integrated risks of the Company. The main function of RMC is to monitor various risks likely to arise and to examine 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. All the heads of operational divisions are required to list out various risks, pertaining to their functional areas and the controls/action plan formulated to mitigate the same and seek approval of the Risk Management Committee (RMC).

18. ISO 9001:2008 QUALITY ASSURANCE CERTIFICATION

REC 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.

19. HUMAN RESOURCES MANAGEMENT

In order to professionalize the Executive strength of REC and also to infuse fresh blood, 7 Executives were appointed through open advertisement and 27 Executives through campus recruitment drawn from premier Institutions empanelled for the purpose during the year under review.

The total manpower at the close of the financial year 2010-11 i.e. on 31.03.2011 was 688 which include 396 executives and 292 Non-executives.

19.1 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 31.03.2011 are given below:

Group Total No. of SC ST employees

A 366(332) 32(30) 9(9)

B 137(153) 18(19) 3(3)

C 87(87) 17(17) 0(0)

D 98(101) 30(31) 2(3)

Total 688(673) 97(97) 14(15)

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

19.2 Training & Human Resource Development

As a means of equipping employees with a range of skills including their renewal and to enable them perform their responsibilities, training and HRD continued to receive priority during the year. REC Training and Human Resource Development policy aims at sharpening the managerial skills and competence needed for better employee performance and provides all possible opportunities to the employees to improve their performance and productivity. The training inputs are provided to promote better understanding of professional requirements as well as for sensitization to professional, socio-economic and political environment in which work is done and also for spiritual, health and attitudinal change processes. Significant focus area in training and HRD has been development of functional skills, soft skills as well as those related to areas such as IT, Rajbhasha etc.

Based on the assessed needs and as means to satisfy them, the Company sponsored 149 employees to various training programmes, workshop etc. within the country and abroad. In addition, 25 training programmes were conducted in house, which were attended by 448 employees. In order to enable them develop global exposure several Officers were sent to attend various programmes abroad to countries viz. Germany, Malaysia, Singapore etc. Taken together, these initiatives enabled the Company to Significant out-perform MoU targets. As against the target of 1500 mandays of training, REC achieved a figure of 2732 mandays for the year.

19.3 Employee Welfare

REC has been providing a wide range of welfare amenities to employees; to take care of their diverse needs with a view to ensure their committment to the organizational objectives. In order to provide better medical facilities to the employees / their dependent family members at Corporate Office and Zonal / Project Offices (including CIRE, Hyderabad), the Company during the year has expanded the list of empanelled Hospitals under the "Direct Payment" Scheme.

19.4 Representation Of Women Employees

Your Company provides equal growth opportunities to its women employees. REC's Women Cell celebrated the "International Women's Day" on Tuesday, the 08th March, 2011.

19.5 Industrial Relations

The Industrial Relations continued to be healthy, cordial and harmonious. The process of consultation with the REC Employees and REC Officers' Association on important issues governing

employees' benefits and welfare etc. continued and on majority of the issues, consensus could be achieved which is a reffection of the atmosphere of mutual trust and harmonious relations that prevails in the Company. During the year 2010-11, a Bi- partite Wage Settlement was arrived at & implemented which comprehensively redefnes the structure of salary, grade & pay scales and other elements of compensation including provision of a comprehensive structure of social security along with provisions of economic rehabilitation policy, pension, provision of the insurance cover for long term employees' liabilities etc. Hailed as a historic event in the organization, this has brought REC fully in sync with other Navratna PSUs in Power Sector and ensured high employee motivation. A committed REC employee fraternity ensured best ever collective performance excelling all past records during the year.

Dr. J. M. Phatak, CMD, REC receiving "asia pacifc Hrm Congress award 2010" for "Organisational Development & Leadership" from Shri Bhaskar Chatterjee, Secretary to the Govt. of India, Department of Public Enterprises, on 3rd September, 2010.

19.6 Public Grievance Redressal Machinery

In accordance with the guidelines issued by the Govt. 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 meeting day to attend the grievances by the Heads of Divisions at Corporate Office as well as Zonal / Project Offices and CIRE.

19.7 Sports Activities

In the year 2010-11, REC hosted Inter-CPSU Kabaddi Tournament as well as sponsored its Team to the Inter-CPSU Table Tennis and Chess Tournaments organized by various CPSUs of Power Sector under the aegis of Power Sports Control Board (P.S.C.B.).

REC Team receiving the Silver Trophy for winning the Inter-CPSU Chess and Bridge Tournament 2011 in April 2011 at Shillong.

20. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

20.1 During the year, the Corporate Social Responsibility initiatives were pursued actively with a view to integrate REC Business operations with social responsibilities to all stakeholders. Strategic focus was accorded by the REC CSR vision which was articulated during the year as follows:

"REC, through its Corporate Social Responsibility (CSR) initiatives would strive to encourage excellence in young Indian champion achievers in all fields to shine at international levels and also to contribute towards modernization of society as its social responsibility to all stakeholders".

20.2 Accordingly the CSR activities have been pursued as "Sustainable Projects under Corporate Social Responsibility" as per policy of REC realigned with the DPE Guidelines issued in this regard in April 2010. For the fiscal 2011 CSR Budget @ 0.25% of previous year Profit after Tax was allocated amounting to Rs.5.00 crore. Against this a number of projects were sanctioned during the year aggregating to Rs.5.10 crore. Promotion of young talent in Education, Sciences and Sports was a key programme pursued during the year. Through the Homi Bhabha Centre for Science education, TIFR, Mumbai, all the Olympiad winner students were rewarded with awards to promote education and excellence in these fields. Similarly a program has been launched with the National Council for Education Research and Training (NCERT) to provide awards to selected scholars. Further, awards have also been instituted for young champions in various sports under which the identified sportspersons is provided awards for the purpose of defraying the cost of preparation / participation for international sports events so as to enable them win medals in International competitions for the country.

20.3 Assistance was also provided to The Energy Resources Institute (TERI) for its ongoing initiative of "Lighting a Billion Lives" (LABL). For provision of solar lanterns for Ãpoorly Electrified' 45 villages in the states of Assam, Madhya Pradesh and Maharashtra under which over 50 Solar LED Lanterns will be distributed in each village aggregating over 2250 Nos.

20.4 Other projects include assistance for skill upgradation and employment assistance for Safai Karamcharis and BPL youth; assistance to IIT, Delhi for "Design and Development of Solar, Wind energy conversion system for Rural Electrification"; assistance to one agency which implements the midday meal program in Government schools for transportation of cooked food to school children in rural areas; assistance for a girls hostel in a remote village in South 24 Parganas of West Bengal along with provision of Solar lighting; provision of a "Community Mobile Clinic" to improve the overall health status in 10 villages surrounding Chandpur area in Faridabad district of Haryana; assistance to a project for free operative eye treatment; assistance for promotion of art and culture etc.

21. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

21.1 The Company maintains system of Internal Control including suitable monitoring procedures which ensures accurate and timely financial reporting of various transactions, efficiency of operations and compliance with statutory laws, regulations and Company policies. In order to ensure that all checks and balances are in place and all internal control system are in order, regular and exhaustive Internal Audit of various Divisions / offices are conducted by In-house Internal Audit Division and for some selected Project Offices by experienced firms of Chartered Accountants. Audit Committee periodically reviews the Significant findings of different Audits as prescribed in the Companies Act and in the Listing Agreement.

21.2 During the year, the Internal Audit Division has been further strengthened with induction of more professionals and implementation of updated REC Internal Audit Manual (2010). The Internal Audit Division covers all the major areas of operations including identified critical / risk areas as per the Annual Internal Audit Programme. The Division also helps in improving accuracy and efficiency of transactions and operations by undertaking periodical review of controls and examination of records of the Company.

22. VIGILANCE ACTIVITIES

22.1 The major thrust of the Vigilance Division is on "Preventive Vigilance" with a view to bring about greater transparency in systems and procedures. Several measures/steps have been taken in this direction. E-procurement for procurements exceeding Rs.10 lakhs has been implemented. The Procurement Guidelines have been improved upon incorporating latest CVC instructions and good practices of other Public Sector Enterprises. The final stage of computerization of Annual Property Returns (APR) where employees can submit their APRs details online was completed during the year. The returns for the calendar year ending 31.12.2010 were accordingly furnished on-line. Leveraging of Technology has also been done to provide online status of loan applications. As per instructions of CVC, REC (CDA) Rules have been reviewed and have been made more comprehensive.

22.2 Inspections and field visits are being regularly conducted by the Vigilance Division. The Audit Reports are examined from vigilance point of view. Regular meetings are conducted with Functional Divisions to streamline the system and procedures. Training programmes are also being organized for vigilance and non-vigilance Officers at Corporate Office as well as field Offices on vigilance related matters.

22.3 The Vigilance Awareness Period was organized from 25th October to 1st November, 2010. A Vigilance Handbook was released at the inaugural session of the Vigilance Awareness Period on 25th October, 2010. This Handbook, inter alia, covers vigilance related aspects like concept of vigilance, role of CVC/CBI, handling of complaints, whistle blower policy, investigation, disciplinary proceedings, vigilance clearance procedure, coordination with external agencies, organization and employee related issues. During this period, posters containing different messages discouraging corruption and encouraging preventive vigilance were displayed at Corporate Office as well as field Offices. Debate and Essay Writing Competitions were organized for executives as well as non-executives. Eminent faculty was also invited for delivering lectures on various important topics.

22.4 In compliance to the instructions of CVC, the sensitive posts in the Corporation were identified and HR Division has rotated many Officers working on these posts for a long time. Agreed lists were finalized in respect of all Zonal Offices / Project Offices / Central Institute of Rural Electrification (CIRE) in addition to Corporate Office after constant pursuation with local branches of CBI. Prescribed periodical returns were sent to CVC, CBI, MoP on time.

22.5 The performance of Vigilance Division was reviewed regularly by the CVC, Board of Directors and CMD, REC in addition to constant reviews undertaken by the CVO, REC in accordance with the prescribed norms. Two disciplinary cases are pending and only 3 complaints are pending as on date.

23. IMPLEMENTATION OF OFFICIAL LANGUAGE

23.1 Strenuous efforts were made to achieve targets set out in the Annual Programme 2010-11 issued by Department of Official Language. During the year, Officers & Staff of the Company showed keen interest in Hindi with the result that its usage has increased in day to day working. In order to encourage employees, all Incentive Schemes introduced by the Government of India have been implemented in the Company.

23.2 Inspections were carried out to assess the progressive use of Hindi in 15 divisions of Corporate Office and suggestions were given to them to improve the shortcomings. During the year, inspection of 10 Project Offices has been carried out. Ministry of Power's Officers have also inspected four Project Offices during the year. A target of 25% inspection of Divisions of Corporate Office & Zonal / Project Offices was set out in the Annual Programme 2010-11 by Official Language Department and against this the Company has achieved the double target of inspections at Corporate Office as well as Zonal /Project Offices.

23.3 The Company has been honoured with RAJBHASHA SHRI SAMMAN by Bharatiya Rajbhasha Vikas Sansthan, Dehradun during the year 2010-11.

23.4 The Company 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 during Hindi Pakhwara from 1.9.2010 to 14.9.2010 which witnessed participation of employees and Officers in large scale.

23.5 A Prize Distribution Function was organized on 27.12.2010. Dr. P. C. Tandon, Sr. Reader, Delhi University was Chief Guest. Winners of these competitions were awarded Certificates of Merits & cash prizes by CMD, REC. Famous Hindi Poet Mr. Arun Jamini, Mr. Deepak Gupta & Mr. Mahendra Ajnabi charmed with their satirical poetry in Hindi and motivated all present to work in Rajbhasha.

Hon'ble Union Minister of Power, Shri Sushilkumar Shinde addressing the Rajbhasha Sammelan organized by REC under the aegis of Ministry of Power, Government of India at India International Centre, New Delhi on May 16, 2011.

23.6 Cash Prizes and Certificates were given to encourage employees for doing their Original Work in Hindi.

23.7 Four quarterly review meetings of Official Language Implementation Committee were held during the year 2010-11 under the Chairmanship of CMD, in which detailed discussions were held to review the progress and suggest measures to overcome the difculties in order to achieve the targets.

23.8 In order to increase use of Hindi by all in Official work, ten Hindi workshops were organized in Corporate Office and nine in Zonal/Project Offices, in which 136 Officers and 104 employees participated.

23.9 Maintaining of required ratio in purchase of Hindi & English books for Library was ensured and Company library has been equipped with a large number of Hindi literary books, magazines & reference publications.

23.10 REC's website is available both in Hindi and English and is being updated from time to time. Billingual 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 REC intranet.

24. FINANCIAL STATEMENTS / DOCUMENTS UNDER SECTION 212 OF THE COMPANIES ACT, 1956

The Ministry of Corporate Aaffairs, 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, profit and loss account and reports of the board of directors and auditors of the subsidiaries have not been attached with the balance sheet of the Company. 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, the financial data of the subsidiaries has been furnished in the Notes on consolidated financial statements, which forms part of the Annual Report. The annual accounts of the Company including that of 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.

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

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.

No foreign exchange was earned during the year under review. The particulars regarding foreign exchange outgo during the year are as under:

Particulars As on 31.03.2011 (Rs. in crore)

Royalty, Know-how, Professional Consultation Nil Fees

Interest 31.27

Finance Charges 50.24

Other Expenses 0.77

Total 82.28

26. SUBSIDIARY COMPANIES

Your Company has formed six subsidiary companies for undertaking specific business activities. The names of these companies, dates of their formation and the percentage of ownership interest in these Companies are as follows:-

Sl. Name of subsidiary Company Date of Percentage No. formation of ownership Interest

REC Transmission Projects Company 1. Limited (RECTPCL) 08.01.2007 100% (a wholly owned subsidiary of REC)

North Karanpura Transmission Company Limited (NKTCL)* 2. 23.04.2007 100% (a wholly owned subsidiary of RECTPCL)

Talcher II Transmission Company Limited (TTCL)* 3. 01.05.2007 100% (a wholly owned subsidiary of RECTPCL)

REC Power Distribution Company 4. Limited (RECPDCL) 12.07.2007 100% (a wholly owned subsidiary of REC)

Raichur Sholapur Transmission Company Limited (RSTCL)* 5. 19.11.2009 100% (a wholly owned subsidiary of RECTPCL)

Vemagiri Transmission System Limited (VTSL) 6. 21.04.2011 100% (a wholly owned subsidiary of RECTPCL)

*NKTCL and TTCL have been transferred to M/s Reliance Power Transmission Limited on 20.05.2010 and 27.04.2010 respectively. RSTCL has been transferred to a Consortium of M/s Patel Engineering Limited, M/s Simplex Infrastructures Limited and M/s BS TransComm Limited on 07.01.2011.

26.1 REC Transmission Projects Company Limited (RECTPCL)

RECTPCL has successfully concluded the process of selection of developer as Transmission Service Provider (TSP) for three inter- State Transmission Projects during the year 2010-11 allocated by Ministry of Power, Government of India namely (i) North Karanpura Transmission System; (ii) Talcher-II Augmentation System and (iii) Transmission System associated with Krishnapattnam UMPP Ã Synchronous interconnection between Southern Region and Western Region (Part-B). Three project specific Special Purpose Vehicle (SPVs) namely North Karanpura Transmission Company

Limited (NKTCL), Talcher II Transmission Company Limited (TTCL) & Raichur Sholapur Transmission Company Limited (RSTCL) were established as wholly owned subsidiary of RECTPCL for development of above three projects. Subsequent to successful conclusion of the selection process, North Karanpura Transmission Company Limited (NKTCL) & Talcher II Transmission Company Limited (TTCL) have been transferred to M/s Reliance Power Transmission Limited on 20.05.2010 & 27.04.2010 respectively. Similarly, Raichur Sholapur Transmission Company Limited (RSTCL) has also been transferred to Consortium of M/s Patel Engineering Limited, M/s Simplex Infrastructures Limited & M/s BS TransComm Limited on 07.01.2011. The selected bidders have acquired the project specific SPV after payment of Acquisition Price for the acquisition of one hundred percent (100%) of the equity shareholding of the SPV.

Ministry of Power, Government of India vide Gazette notification dated March 16, 2011 has appointed RECTPCL as Bid Process Coordinator (BPC) for selection of developer as Transmission Service Provider for three new projects viz. Transmission System associated with IPPs of Vemagiri Area: Packages A, B & C through tariff based competitive bidding process. These projects will be implemented on Build, Own, Operate and Maintain (BOOM) basis and two stage process featuring separate Request for Qualification (RFQ) and Request for Proposal (RFP) will be adopted for selection of developer in accordance with the guidelines notified by Ministry of Power, Government of India. The project specific Special Purpose Vehicle namely Vemagiri Transmission System Limited for Package-A has been incorporated on April 21, 2011.

The total length of transmission lines involved in Package A is about 400 KM. In response to global notification for Request for Qualification (RFQ) for said project, RECTPCL has received responses from 28 bidders which include foreign bidders also. The responses are presently under evaluation and short-listing of bidders shall be concluded shortly.

26.2 Financial Performance During 2010-11

During the year ended 31st March, 2011, REC Transmission Projects Company Limited (RECTPCL) has been able to generate an income of Rs.16.49 crore. The profit before tax and profit after tax for the year is Rs.16.34 crore and Rs.10.92 crore respectively. The net worth of RECTPCL has reached to Rs.30.77 crore against initial capital injected by REC of Rs.0.05 crore.

26.3 REC Power Distribution Company Limited (RECPDCL)

26.3.1 RECPDCL during the year completed milestone of Third Party Inspection (TPI) of 24,136 villages and 1,617 feeders under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and Feeder Renovation Programme (FRP) works respectively. The Company has carried out the material inspection of more than 17,500 distribution transformers in 13 DISCOMS under RGGVY and material inspection of High Voltage Distribution System (HVDS) projects of Uttar Haryana Bijli Vidyut Nigam Ltd. (UHBVN).

26.3.2 RECPDCL prepared the Detailed Project Report (DPR) for the Restructured-Accelerated Power Development and Reform Program (R-APDRP-Part-B) Scheme for 31 towns (20 for Uttar Haryana Bijli Vidyut Nigam Ltd. (UHBVN) and 11 for Dakshin Haryana Bijli Vidyut Nigam Ltd.)

26.3.3 The Company has widened its business horizon by taking up the new initiatives viz., TPI works of HVDS, Energy Audit, Carrying out Energy Accounting & Energy Audit in Distribution Network and Lender Engineer Assignment. During the year 2010-11, the Company has conducted Energy Audit at Indian Institute of Management (IIM) Lucknow, NOIDA campus and National Institute of Public Finance and Policy (NIPFP), New Delhi

26.3.4 The Company has also entered into a MOU with M/s North Delhi Power Ltd. (NDPL) to undertake the business of distribution of electricity in the License area. This new initiative would help the Company in achieving its main objective to promote, develop, construct, operate, distribute and maintain 66 kV and below distribution network.

26.4 Financial Performance During 2010-11

26.4.1 During the year ended 31st March, 2011, RECPDCL has been able to generate gross income of Rs.20.44 crore and profit before tax and profit after tax of Rs.6.16 crore and Rs.4.04 crore respectively.

26.4.2 The net worth of the Company has doubled this year and reached to Rs.8.15 crore against initial capital injected by REC of Rs.0.05 crore. For the year, the Board of Directors have proposed a dividend @100% on par value, which is subject to approval of shareholders of the Company in the Annual General Meeting.

28. DIRECTORS' RESPONSIBILITY STATEMENT

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

(i) in the preparation of the Annual Accounts for the period ended 31.03.2011, the applicable Accounting Standards had 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 aaffair view of the state of aaffairs 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

29.1 As part of the Green Initiative in Corporate Governance, the Ministry of Corporate Aaffairs (MCA), Government of India, through its Circular Nos. 17/2011 and 18/2011, dated April 21 and 29, 2011 respectively, has also allowed companies to send Official Notices/documents to their shareholders electronically.

29.2 As a responsible corporate citizen, your Company has also taken initiative by seeking consent/dissent of its shareholders for electronic delivery of documents such as Notice of Annual General Meeting, Annual Report (Audited Financial Statements, Directors' Report, Auditors' Report etc.) for the financial year ended March 31, 2011. Accordingly e-mails were sent to 113790 shareholders whose e-mail addresses were already registered with Karvy Computershare Private Limited, Registrar & Share Transfer Agent (R&TA) of REC/Depository Participant. Response to the Green Initiative was overwhelming and 84852 shareholders opted for electronic delivery of Annual Report for the year 2010-11. Accordingly, Annual Report 2010-11 is being sent to these shareholders by e-mail. Annual Report 2010-11shall also be available on REC website www.recindia.nic.in.

29.3 It is reiterated that upon receipt of a

Mar 31, 2010

The Directors have the pleasure in presenting the Forty First Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2010.

1. PERFORMANCE HIGHLIGHTS

1.1 The highlights of performance of the Company for the year 2009-10 were as under with comparison of previous years performance:-

Parameter 2009-10 2008-09 (Rs. in crore) (Rs. in crore)

Loans sanctioned 45357.36* 40745.84* Disbursements (including

subsidy under RGGVY) 27127.14 22277.86

Recoveries 12496.12 9796.97

Total Operating Income 6549.76 4757.17

Profit before tax 2649.19 1920.11

Profit after tax 2001.42 1272.08

* Excluding subsidy under RGGVY.

1.2 Financial Performance

The total operating income of the company for the year increased by 38% to Rs. 6549.76 crore from Rs. 4757.17 crore during the previous year. The profit before tax increased by 38% to Rs.2649.19 crore from Rs. 1920.11 crore for the previous year and the profit after tax increased by 57% to Rs. 2001.42 crore from Rs. 1272.08 crore for the previous year.

1.3 Dividend

In addition to interim dividend of Rs.3.00 per share paid in January, 2010, your Directors are happy to recommend a final dividend of Rs.3.50 per share for the year 2009-10. The total dividend for the year will work out to Rs. 6.50 per share as against Rs. 4.50 per share paid last year. The total dividend pay-out for the year will amount to Rs.603.21 crore.

REC declares final dividend of Rs. 214.67 crore for financial year 2008-09. The dividend cheque is handed over by Shri P. Uma Shankar, CMD, REC to Honble Union Minister of Power, Shri Sushilkumar Shinde on 25th September, 2009.

1. 4 Further Public Offering (FPO) of Shares

In February 2010 the Company made Further Public Offering (FPO) of 171,732,000 equity shares of face value of Rs. 10 each for cash at prices determined through the alternate book-building method under Part D of Schedule XI of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The Issue comprised of a fresh issue of 128,799,000 equity shares by the company and an Offer for Sale of 42,933,000 equity shares by the President of India, acting through Ministry of Power, Government of India, as selling shareholder. The Shares were issued to Non-Institutional/ Retail Individual Investors at Rs. 203/- per equity shares, to employees of the Company at Rs.193/- per equity shares and to QIB category including mutual funds at Rs. 206/- & above as per bids submitted by them. The Issue got a phenomenal response and it was oversubscribed by 3.14 times. The total number of applications received were 57858. The fresh equity shares were allotted on 5th March 2010 and the total amount raised by the Company through FPO was Rs. 2647.53 crore. The proceeds of the fresh issue of equity shares have been utilized for the purpose of the business of the Company as mentioned in the offer document. Trading in equity shares of the Company issued under FPO commenced on the National Stock Exchange of India Limited and Bombay Stock Exchange Limited on 8th March 2010, and requisite Listing Fees have been paid to each of these Stock Exchanges.

In the Post-FPO scenario, the shareholding of the Government of India has reduced from 81.82% to 66.80% and the balance 33.20% is held by public.

1.5 Share Capital

The Issued and Paid up Share Capital increased from Rs. 858.66 crore to Rs.987.46 crore as on 31.03.2010 after FPO, against the Authorized Capital of Rs.1200 crore, and an amount of Rs.2499.18 crore (net of Issue expenses of Rs.19.55 crore) has been taken to Security Premium Account.

2. LOANS SANCTIONED

The Company sanctioned loans worth Rs.45357.36 crore during the year 2009-10, as against Rs.40745.84 crore in the previous year excluding subsidy under RGGVY. The state and category-wise break-up of loans sanctioned during the year are given in enclosed Tables-1 and 2 respectively. The cumulative amount of sanctions made since inception upto 31.3.2010 was Rs.266775.59 crore including subsidy under RGGVY. The cumulative state- wise position of sanctions up to the end of 2009-10 is given in enclosed Table-3.

3. DISBURSEMENTS

A total sum of Rs.27127.14 crore was disbursed during the year 2009-10 as against Rs. 22277.86 crore in the previous year including subsidy under RGGVY. The cumulative amount disbursed since inception upto 31.3.2010 was Rs.113533.13 crore excluding subsidy under RGGVY. The state-wise disbursements and repayment by borrowers during the year together with cumulative figures and outstandings as on 31.3.2010 are given in enclosed Table-4.

4. RECOVERIES

4.1 The amount due for recovery during the year 2009-10 was Rs.12461.02 crore as compared to Rs.9788.90 crore during the previous year. The overdues from defaulting borrowers were Rs.166.60 crore as on 31.3.2010. The Company recovered a total sum of Rs.12496.12 crore during the year 2009-10 against Rs. 9796.97 crore during the previous year. The details are given below:

Particulars Total (Rs. in crore)

Overdues as on 1.4.2009 201.70

Dues receivable during the year 12461.02

Received during the year 12496.12

Overdues as on 31.03.2010 166.60

4.2 Out of the overdues of Rs.166.60 crore as on 31.03.2010, a sum of Rs.30.32 crore stands recovered till 31.05.2010.

4.3 The company has also been making efforts to bring down Non-Performing Assets (NPAs) to Zero level. As on 31.03.2010 the Gross NPAs of the company stood at Rs.19.54 crore (i.e. 0.03% of Gross Loan Assets), as compared to Rs.68.89 crore (0.14% of Gross Loan Assets) as on 31.03.2009.

5. FINANCIAL REVIEW

5.1 A summary of Financial Results

The summary of financial results of the Company for the year ended 31st March, 2010 is given below:

(Rs. in crore)

Standalone Consolidated

Particulars 2009-10 2008-09 2009-10 2008-09

Gross Income 6707.60 4931.28 6747.63 4936.55

Profit before tax 2649.19 1920.11 2680.76 1922.36

Depreciation 2.16 1.36 2.18 1.37

Provision for Income Tax & Deferred Tax 647.77 648.03 658.51 648.83

Net Profit / Profit after Tax 2001.42 1272.08 2022.25 1273.53

Appropriations :

Transfer to Special Reserve 458.03 340.00 458.03 340.00

Transfer to Reserve for Bad & Doubtful Debts 107.60 80.00 107.60 80.00

Interim Dividend 257.60 171.73 257.60 171.73

Dividend Tax on Interim Dividend 43.77 29.19 43.77 29.19

Proposed Final Dividend 345.61 214.67 345.66 214.72

Dividend Tax on proposed Final Dividend 57.40 36.48 57.41 36.49

Transfer to General Reserve 500.00 255.00 500.75 256.00

Balance carried forward 557.17 145.01 577.20 145.40

5.2 Resource Mobilization

The Company mobilized Rs.24028.24 crore from the market during the year 2009-10. This includes Rs.3055 crore by way of loan from commercial banks, Rs.3057.77 crore by way of capital gain tax exemption bonds, Rs.13529.50 crore by way of non-priority sector bonds, Rs.3150 crore through Commercial Paper(CP), Rs.630 crore by way of Short Term Loan from Commercial Banks and Rs.605.97 crore by way of Official Development Assistance (ODA) loan from Kreditanstat fur Wiederaufbau (KfW), Germany & Japan International Cooperation Agency (JICA),Japan. The domestic debt instruments of REC continued to enjoy "AAA" rating Ã the highest rating assigned by CRISIL, CARE, FITCH & ICRA-Credit Rating Agencies.

Cash Credit Facilities

For day to day operations, the Company also arranged cash credit limits to the tune of Rs. 1200 crore from various banks.

5.3 Sovereign rating

REC enjoys international credit rating equivalent to sovereign rating of India from International Credit Rating Agencies Moodys and FITCH which is "Baa3" and "BBB-" respectively.

5.4 Cost of borrowing.

As per the Finance Act 2006, only REC and National Highway Authority of India (NHAI) were eligible to raise money through bonds issued under Section 54 EC of the Income Tax Act, 1961. This helped in keeping the cost of borrowing at a low level. The overall annualized average cost of funds was 7.31% during the year 2009-10. As a result REC is able to deliver debt financing at competitive rates.

5.5 Redemption and Pre-Payment

During the year, the Company repaid a sum of Rs. 15.32 crore to the Government of India. It also redeemed a total sum of Rs.838.92 crore owed to non- priority/ priority sector bond holders. In addition, Rs.7414.99 crore worth of Capital Gain Tax Exemption Bonds and Rs.13.46 crore of Infrastructure Bonds were also redeemed. The company also redeemed long term and short term loans from Banks of Rs.2624.62 crore and Commercial Paper of Rs.1995 crore.

5.6 Particulars regarding Conservation of Foreign Exchange Earnings & Outgo

The particulars regarding foreign exchange outgo during the year under review are given in point 16 of Schedule 17 to the "Notes on the Accounts" forming part of the Annual Accounts. No foreign exchange was earned during the year under review.

5.7 Financial status at the close of the year

At the close of the financial year 2009-10, the total resources of the Company stood at Rs.67028.56 crore. Out of this sum, Equity Share Capital contributed Rs.987.46 crore, Reserve and Surplus stood at Rs.10092.87 crore, Loans from LIC, Commercial Banks and Market Borrowings accounted for Rs.55948.23 crore. These funds were deployed as Long / Short Term Loans of Rs.66452.61 crore and Fixed Assets of Rs.89.91 crore (including Capital Work in Progress), Investments of Rs.909.86 crore, Deferred Tax Asset of Rs.7.37 crore and balance of Rs.(-) 431.19 crore in Net Current Assets.

During the year 2009-10 an amount of Rs.3068.39 lacs was written back to income as provision for Bad & Doubtful Debts made in earlier years, which were no longer required due to realisation / upgradation of Loan Assets.

6. DIRECTORS RESPONSIBILITY STATEMENT

With reference to Section 217 (2AA) of the Companies Act,1956, it is confirmed as under : Ã

(i) that in the preparation of the Yearly Accounts for the

period ended 31.03.2010, the applicable Accounting Standards had been followed and no material departures have been made from the same;

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

7. FINANCING ACTIVITIES

REC has been funding power generation, transmission & distribution projects besides electrification of villages. Various initiatives in this regard are enumerated below:

7.1 Generation

During the year 2009-10, the Company sanctioned 26 nos. of generation / R&M loans including 5 nos. additional loan assistance with total financial outlay of Rs.24031.32 crore, Since 2002-03 and upto 31.03.2010, REC has sanctioned financial assistance of Rs.103804 crore for R&M, thermal, wind and hydro generation projects. REC has disbursed Rs.8349 crore during 2009-10 against the on-going generation projects.

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

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

STATE SECTOR

Fresh Loan 9 12282.37

Additional Loan 4

PRIVATE SECTOR

Fresh Loan 12 11749.95

Additional loan 1

Total : Fresh Loan+Additional Loan 21+5=26 24031.32

7.2 Transmission & Distribution

REC continued to play an active role in creating new infrastructure and improving the existing ones under the transmission and distribution network in the country under its T&D portfolio. In line with the countrys objective to provide power for all by the year 2012 and also reduce the AT&C losses, REC has been financing schemes for expansion and strengthening of the transmission network and more importantly, modernizing of the distribution system.

7.3 System Improvement & Bulk Loan

During the year 2009-10, a total of 289 system improvement schemes and bulk loan schemes were sanctioned involving a loan outlay of Rs.15421.64 crore. This included: (i) 30 schemes involving a loan assistance of Rs. 1177.75 crore for financing investment in the distribution system by way of installation of essential equipments like transformers, meters, capacitors etc. (ii) 29 schemes involving a loan assistance of Rs.1705.48 crore for conversion of Low Voltage Distribution to High Voltage Distribution System (HVDS), (iii) 122 schemes for Rs.3466.33 crore for improving the distribution system, and (iv) 108 schemes for Rs.9072.07 crore for improving the transmission network.

7.4 Pumpset energization

During the year, 240020 electric irrigation pumpsets were reported energized under REC financed schemes. 103 new schemes for a loan assistance of Rs.964.74 crore were sanctioned during the year under this category. The state- wise details and cumulative position up to 31.3.2010 are given in the enclosed Table-5

7.5 Activities in North Eastern (NE) States

A loan assistance of Rs.30.83 crore was disbursed to the NE states under T&D programme during the year 2009-10 as compared to Rs.25 crore during the previous year. 1 scheme for a loan assistance of Rs.32.54 crore was sanctioned to Nagaland during 2009-10 under System Improvement category.

8. RAJIV GANDHI GRAMEEN VIDYUTIKARAN YOJANA (RGGVY)

Government of India, in April 2005, launched the scheme ÃRajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)Ã Scheme of Rural Electricity Infrastructure and Household Electrification for the attainment of the National Common Minimum Programme (NCMP) goal of providing access to electricity to all households in 5 years. The scheme is being implemented through REC. Under the scheme 90% capital subsidy is being provided by Govt. of India for overall cost of the projects.

8.1 Electrification of villages and BPL Households

Initial approval was for implementation of Phase I of the scheme for capital subsidy of Rs.5000 crore during X-Plan period. 235 projects covering 180699 villages (68763 un- electrified and 111936 electrified villages) with the total sanctioned project cost of Rs. 9733 crore were sanctioned for implementation by the Ministry of Power in X-Plan period.

Further approval has been accorded for capital subsidy of Rs.28000 crore for continuation of the scheme in XI- Plan for attaining the goal of providing access to electricity to all households, electrification of about 1.15 lakh un- electrified villages and electricity connections to 2.34 crore BPL households. 338 projects covering 292767 villages (49736 un-electrified and 243031 electrified villages) costing Rs. 16621 crore have been sanctioned by Ministry of Power for implementation in XI-Plan.

The state-wise details of projects sanctioned in X-Plan and XI-Plan periods under RGGVY are furnished in the enclosed Table-6.

Under the scheme, it has been reported that works have been completed in 53370 villages (including 18374 un- electrified and 34996 electrified villages) and connections to 49.49 Lakh rural households including 47.18 Lakh BPL households have been provided during 2009-10.

Cumulatively, works in 190858 villages (78256 un- electrified and 112602 electrified villages) have been completed and connections to 100.97 Lakh BPL households have been released under the scheme up to 31.03.2010.

The state-wise details of Achievements of Electrification works in Un-electrified villages & Release of free electricity connections to BPL households upto 2008-09, during 2009-10 and Cumulative Achievements upto 31.03.2010 are furnished in the enclosed Table-7.

9. RGGVY - DECENTRALISED DISTRIBUTED GENERATION (DDG)

RGGVY provides for DDG projects from conventional or renewable non-conventional sources such as biomass, bio- gas, mini hydro, wind and solar etc. for villages where grid connectivity is either not feasible or not cost effective.

DDG Systems are small power generation units near the load centers.

Ninety per cent capital subsidy would be provided under RGGVY towards overall cost of the DDG projects under the scheme, excluding the amount of state or local taxes, which will be borne by the concerned State/State Utility. 10% of the project cost would be contributed by states through own resources/loan from financial institutions.

A provision of Rs. 540 crore has been kept as subsidy for DDG projects under XI-Plan.

The Guidelines for DDG projects under RGGVY have been issued by Ministry of Power on 12.01.2009. Many States have appointed implementing agencies for DDG projects and are in the process of appointing consultants for preparation of DPRs for DDG projects.

10. CONTRIBUTION OF REC IN PROMOTION OF RENEWABLE/DDG PROJECTS

So far the Company has financed various Renewable Projects as per details given below as on 31.03.2010:

Projects under Implementation and Projects Commissioned.

Sl. Description Projects Projects TOTAL No. under Commi- Implementation ssioned

(i) Value of Loan 1504.58 132.96 1637.54 sanctioned (Rs. crore)

(ii) Disbursement 267.73 126.10 393.83 made so far (Rs crore)

(iii) Value of Projects 2096.05 378.61 2474.66 Sanctioned (Rs crore)

(iv) MW of Projects 332.70 61.46 394.16

(v) No. of Projects 12 11 23

11. STANDARDISATION, QUALITY CONTROL & MONITORING

The 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 and has recently issued / updated technical specifications on Insulation Piercing Connectors for LT Aerial Bunched Cables of Voltage upto 1100 volts and Anchor (Dead end) and Suspension Assemblies for LT Aerial Bunched Cables of working voltage upto and including 1100 volts.

In line with the Three-Tier Quality Control Mechanism for ensuring proper quality of materials and works in implementation of RGGVY XI - Plan schemes, REC Quality Monitors (RQM) have been appointed during the financial year covering 332 projects in 24 states of the country. And these RQMs have undertaken 1245 Nos. of RGGVY project materials inspections during the year under review for ensuring quality of equipments and an amount of Rs.1,35,27,230/- has been released to the RQMs.

12. ENERGY EFFICIENCY SERVICES LIMITED

REC along with three other PSUs namely Powergrid, NTPC, and PFC as partners has formed a Joint Venture Company by the name Energy Efficiency Services Limited (EESL). The total equity requirement for EESL is Rs. 190 crore to be shared equally by the four PSUs. EESL shall 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.

13. INTERNATIONAL COOPERATION & DEVELOPMENT

13.1 Japan International Cooperation Agency (JICA)

(i) REC had entered into a loan agreement with JICA on

31.03.2006 for loan assistance of 20.0629 Billion Japanese Yen (approx. Rs. 784 crore with an exchange rate of 100 yen = Rs. 38.01- As on 31.03.2006) under the Official Development Assistance (ODA) loan package for the Rural Electricity Distribution Backbone (REDB) Project of REC envisaging implementation of 749 nos. 33/11 KV new substations and augmentation of 510 nos. of substations. The project is being implemented in the states of Andhra Pradesh, Maharashtra and Madhya Pradesh. The project implementation is at advanced stages, and REC has disbursed a cumulative sum of Rs. 680.55 crore to the sub- borrowers as on 31.03.2010 (Previous Year - Rs. 446.60 crore). Loan amount to the tune of 13.47 Billion JPY has been drawn from JICA as on 31.03.2010 (Previous Year Ã 9.38 Billion JPY). With the financial assistance provided by REC, JICA, 618 nos. of 33/11 KV new substations (Previous Year Ã 405 nos.) and augmentation of 337 nos. of substations (Previous Year Ã 270 nos.) have been completed as on 31.03.2010.

(ii) REC entered into a second loan agreement with JICA on

10.03.2008 for ODA loan of 20.902 Billion Japanese Yen (approx. Rs. 833 crore with an exchange rate of 100 yen = Rs. 39.86 - As on 10.03.2008) for implementation of transmission system project in the state of Haryana for strengthening intra-state transmission systems in the state. The project implementation is in progress, and REC has disbursed a cumulative sum of Rs. 249.39 crore to the sub-borrowers as on 31.03.2010 (Previous Year - Rs. 28.07 crore). Loan amount to the tune of 3.28 Billion JPY has been drawn from JICA as on 31.03.2010 (Previous Year Ã 0.55 Billion JPY).

13.2 Indo-German Bilateral Cooperation Programme

(i) REC entered into a loan agreement with KfW on

08.08.2006 for ODA loan of 70 Million Euro (approx. Rs. 418 crore with an exchange rate of 1 Euro = Rs. 59.74 Ã As on 08.08.2006) for implementation of High Voltage Distribution System (HVDS) Project under KfW- Energy Efficiency Programme-I in the Chittoor and Kadapa Districts in the state of Andhra Pradesh. The project is nearing completion and REC has disbursed a cumulative sum of Rs. 448.43 crore to the sub-borrowers as on 31.03.2010 (Previous Year - Rs. 224.57 crore). Loan amount to the tune of 67.84 Million Euro has been drawn from KfW as on 31.03.2010 (Previous Year Ã 35.28 Million Euro).

(ii) REC entered into a second loan agreement with KfW on

16.03.2009 for ODA loan of 70 million Euro (approx. Rs. 466.13 crore with an exchange rate of 1 Euro = Rs. 66.59 Ã As on 16.03.2009) for implementation of Energy Efficiency and Reliability Project in the state of Haryana. KfW has engaged international consultant to assist UHBVN in preparation of Detailed Project Reports and Bid documents. The procurement activities have commenced and the drawal of funds from KfW in respect of this loan is expected to commence in the financial year 2010-11.

(iii) During the annual bilateral consultation between Government of India & Government of Germany, KfW has committed a third line of credit to REC to the tune of Euro 100 Million for financing Renewable Energy & Energy Efficiency Projects. The loan agreement is expected to be signed during financial year 2010-11.

13.3. Asian Development Bank (ADB)

ADB has approved a line of credit amounting to US $ 225 million to REC on 27.11.2008 to finance transmission and distribution networks in rural sector. Further negotiations with ADB for availing the loan are under progress.

13.4 Agency Francaise De Development (AFD)

RECs proposal for financing Energy Efficiency Project (HVDS & Pumpset Replacement) in the state of Rajasthan has been recommended by Ministry of Power, Government of India to Ministry of Finance for consideration under Official Development Assistance from AFD, France, under Indo French Co-operation, for financial assistance to the tune of Euro 80 million. Further negotiations with AFD are expected to fructify during financial year 2010-11.

13.5. Clean Development Mechanism (CDM)

The four nos. of Project Design Documents (PDDs) on HVDS Project of APSPDCL financed by REC under REC- KfW Energy Efficiency Programme-I, which received Host Country Approval from MoEF in January 2009 for availing carbon credits under CDM, are under validation by the UNFCC accredited validators. This activity has been undertaken as a pilot project for CDM in Distribution Sector with the assistance of KfW, Germany.

14. ERP BASED INTEGRATED INFORMATION SYSTEM

14.1 REC has put the on-going ERP project into operation on its raising day i.e. 24.07.2009. The launching Go-Live was done by Shri Sushilkumar Shinde, Honble Minister of Power, in the presence of Shri Bharatsinh Solanki, Honble Minister of State for Power, Shri H.S. Brahma, Secretary, Ministry of Power and Shri P. Uma Shankar, CMD, REC.

14.2 ERP covers all important business areas of REC like Central Accounting, Project Appraisal and sanction, disbursement and management of Loan Accounts, Cash Management & Treasury functions, payroll and purchases etc. This enables capturing of data and information at the point of origin across all offices of REC and flow of the same upto the appropriate level depending on the defined workflow hierarchy.

14.3 An internal assessment estimate has shown that the average time of disbursement of claims to power utilities has reduced from 12.2 days to 1.46 days after implementation of ERP.

14.4 As a part of ERP implementation, a corporate-wide secured IT infrastructure with State-of-art Tier-3 Centralized Data Centre and an MPLS based VPN network (WAN Connecting all offices of REC) has been created. The ERP project has also been audited by 3rd party viz. Pricewaterhouse Coopers.

14.5 Corporate Intranet has been further revamped for more features and information, and faster dissemination of information within REC. The spread of computerization has also increased during the financial year.

14.6 With the implementation of ERP, more desks have been provided with Computer Systems. The present population of desktop systems against total employees stands around 90% (excluding class IV employees)

15. CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION (CIRE)

15.1 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 organizations concerned with Power and Energy. CIRE conducts regular training programmes on various aspects of Generation, Transmission and Distribution for National and International Power Sector Executives.

15.2 Franchising of Distribution Management throughout the country in RGGVY villages is a mandatory requirement. In this connection, Ministry of Power, Govt. of India has chosen CIRE as a Nodal Agency for coordination and monitoring of "National Franchisee Training Programme". Under this programme, it is proposed to train 40,000 Franchisees. CIRE has entered into MOUs with 41 Power Utilities/Institutes for organizing the programmes by them. This training activity will continue upto 2011-12. During the year 2009-10, 257 Franchisee Programmes with 9,349 participants were conducted by various utilities wherein CIRE was also involved in conducting programmes at the location of Power Utilities.

15.3 CIRE was also given by the Ministry of Power, Government of India the mandate as Nodal Agency to implement "National Training Programme for C&D Employees." The supporting staff in technical, non-technical areas working in distribution sector, who are the first interface with the consumers were to be provided training and skill development to effectively deliver their responsibilities and improve the customer satisfaction. Under this programme, 75,000 C&D employees in the country will be trained during the period of XI Five Year Plan. 45 Power Utilities/Institutes have entered into MOUs for organizing programmes by them. During the year 2009-10, 691 C&D Programmes with 17,873 participants were conducted by various utilities.

15.4 Six International Training Prograrmmes under ITEC/ SCAAP, sponsored by Ministry of External Affairs, Govt. of India were also conducted. 97 participants from various countries, such as Afghanisthan, Philippines, Myanmar, Bangladesh, Zimbabwe, Ivory Coast, Zambia, Tajikistan, Thailand, Mauritius, Tanzania, Nigeria, Sudan, Iraq, Egypt, Senegal, Mali, Georgia, Guyana, Syria, Indonesia, Kenya, Malawi, Uzbekistan, Papua New Guinea, Ukrain, Mozambique, Oman, Iran, etc., took part in the following programmes :- (i) Modern Practices in Generation and Transmission Systems

(ii) Innovative Technologies in Transmission & Distribution Systems

(iii) Planning & Financial Management of Power Projects

(iv) Modernization of Power Distribution

(v) Decentralised Distributed Generation & Rural Power Distribution Management

(vi) Financial Management & Accounting Systems for Power Companies

The programmes were of 4/8 weeks duration.

15.5 CIRE also conducted two programmes with 71 participants under the sponsorship of KfW, Germany on "High Voltage Distribution System (HVDS).

15.6 In addition, 10 Customised Programmes on Pilferage of Electricity - Technical & Legal Remedies, Best Practices in Distribution Loss Reduction, Customer Management & Information Systems in Power Sector, Best Practices in Distribution Systems O & M, Finance for Non-finance Executives, Energy Audit, Accounting & Load Management, were also conducted. 353 Officers took part in these programmes.

15.7 CIRE also conducted three R-APDRP programmes sponsored by Ministry of Power/PFC for the executives of power utilities and 79 participants attended the programmes.

15.8 CIRE also conducted Three programmes with 48 participants on Finance for Non-Finance Executives, Human Resource Management in Power Sector, and Strategic Financial Management for Power Sector in collaboration with the Institute of Public Enterprise (IPE), a reputed business school located in Hyderabad, and availed the services of the best faculty resources of the Institute for the benefit of the participants.

15.9 CIRE also conducted 32 programmes with 968 participants under Distribution Reforms Upgrades and Management (DRUM), with financial assistance of USAID. The topics covered included Best Practices in Distribution Loss Reduction, Best Practices in Distribution System Operation & Maintenance, Change Management in Power Distribution, Distribution Efficiency and Demand Side Management, Training of Trainers (TOT) covering topics of Rural Electricity Distribution Franchising, Communication Skills, Employees Motivation & Morale Development, Financial Management of Distribution Business, Electrical Safety Procedures, Accident Prevention and Disaster Management.

15.10 Ten Regular/Open Programmes were organised with 171 participants on topics such as Pilferage of Electricity - Technical & Legal Remedies, Power Purchase Agreement, Energy Audit, Accounting and Load Management, Specifications, Standards & Construction Practices in Distribution System, Power & Distribution Transformers for Efficient Operation, New Developments in Metering, Billing & Collection, Power Sector Accounting with reference to ESAAR & GAAP, Change Management in Power Sector, Power Factor Improvement - Reactive Power Compensation and Safety Management in Power Sector.

15.11 Nine In-house Training Programmes with 134 participants were organised for the employees of REC to upgrade their knowledge and skills on various topics.

15.12 In all, during the year 2009-10, CIRE conducted 80 programmes and trained 2139 participants as per details given below:

Sl. Programme No. of No. of No. Programmes Participants

1 Regular Programmes 10 171

2 Programmes with IPE 3 48

3 DRUM Programmes 32 968

4 National Franchisee Training Programmes organised by CIRE 5 218

5 International Programmes 6 97

6 Sponsored/Customised Programmes 12 424

7 R-APDRP Programmes 3 79

8 In-house Programmes 9 134

Total 80 2139

16. RISK MANAGEMENT

16.1 Asset Liabiliy Management

The Company has a Risk Management Policy which covers inter alia Asset Liability Management and Derivative Instruments. An Asset Liability Management Committee (ALCO) is currently functioning under the leadership of CMD, REC and it comprises of one Independent Director, Director (Finance), Director (Technical), Executive Director (Finance) and General Managers in Finance, Generation and T&D Division. ALCO monitors risk 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, like a forward looking resource raising program based on projected disbursement and maturity obligations. The interest rate risk is monitored through interest rate sensitivity analysis and managed through review of lending rates and cost of borrowings and the terms of lending and borrowing.

16.2 Foreign Currency Risk Management

The Company manages foreign currency risk associated with exchange rate and interest rate risk through various derivative instruments. As on 31st March 2010 the total foreign currency liabilities outstanding are JPY 40.32 billion and Euro 64.16 million which are fully hedged.

17. ISO 9001:2000 QUALITY ASSURANCE CERTIFICATION

REC has implemented Quality Management Systems as per ISO 9001:2000 standards in six major Divisions of Corporate Office and all Project Offices across the country, (except the newly formed Ranchi Project Office).

18. HUMAN RESOURCES MANAGEMENT

In order to professionalize the Executive strength of REC and also to infuse fresh blood, 09 Executives were appointed in REC through open advertisement and 16 Executives through campus recruitment during the period 01-04-2009 to 31-03-2010.

The total manpower at the close of the financial year 2009- 10 i.e. on 31-03-2010 was 673 which include 370 executives and 303 Non-executives.

18.1 Scheduled Caste/Scheduled Tribe Reservations

The directives issued by the Government regarding reservations for SC/ST 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- 03-2010 are given below:

Group Total No. of SC ST employees

A 332(316) 30(25) 9(6)

B 153(148) 19(22) 3(4)

C 87(112) 17(19) 0(1)

D 101(105) 31(31) 3(4)

Grand Total: 673(681) 97(97) 15(15)

(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 renewal, to enable them perform their responsibilities, Training and HRD continued to receive a place of priority during the year. Based on the assessed needs and as means to satisfy them, the company sponsored 95 employees to various training programmes, workshop etc. within the country and abroad. In addition, 18 training programmes were conducted in-house, which were attended by 479 employees including seven programmes conducted at CIRE, Hyderabad exclusively for REC employees. In order to enable them develop global exposure, several officers were sent to attend various programmes abroad viz. Japan, Geneva, Bangladesh etc. Taken together, these initiatives enabled the company to significantly out-perform MOU targets. As against the target of 1300 man-days, REC achieved a figure of 2342 for the year.

18.3 Staff Welfare

In order to provide better medical facilities to the employees / their dependent family members at Corporate Office and Zonal/Project Offices (including CIRE, Hyderabad), the Company has expanded the list of empanelled Hospitals covering 26 more Hospitals under the "Direct Payment" Scheme.

18.4 Women Cell

RECs Women Cell celebrated the International Womens Day on Monday, the 8th March, 2010.

18.5 Industrial Relations

The Industrial Relations continued to be healthy, cordial and harmonious. The process of consultation with the REC Employees and REC Officers Association on important issues governing employees benefits and welfare etc. continued and on majority of the issues, consensus could be achieved which is a reflection of the atmosphere of mutual trust and harmonious relations that prevail in the Company. Motivated employees worked in team sprit and excelled the previous years records.

18.6 Public Grievance Redressal Machinery

In accordance with the guidelines issued by the Govt. 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 meeting day to attend the grievances by the Heads of Divisions at Corporate Office as well as Zonal / Project Offices.

18.7 Sports Activities

REC sponsored its Team to the Inter-CPSU Table Tennis / Chess / Carrom- Tournaments organised by various CPSUs of Power Sector under the aegis of Power Sports Control Board (PSCB).

19. PARTICULARS OF EMPLOYEES UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956.

The requsite information for the Financial Year 2009-10 or part thereof is given below :

(Figures in Rupees)

Sl. Name Salary & Other Perks/ Performance Total No. Allowances Benefits Linked Incentive/ Ex-Gratia

1. Shri P. Uma Shankar, CMD 22,07,758 3,90,716 25,000 26,23,474

2. Shri H.D. Khunteta, Director (Finance) 27,70,562 1,92,862 3,10,151 32,73,575

3. Shri Guljit Kapur, Director (Technical) 20,35,531 1,66,909 2,03,702 24,06,142

4. Shri Rama Raman, Executive Director 18,47,581 6,73,694 2,71,022 27,92,297

5. Shri R. Anbalagan, Chief Manager 22,85,499 9,53,502 6,96,964 39,35,965

20. VIGILANCE ACTIVITIES

20.1 The Vigilance Division headed by the Chief Vigilance Officer (of the rank of Functional Director) constantly endeavoured to emphasize on "Preventive Vigilance" so as to improve upon systems and procedures and leaving minimum scope for discretion. It also ensured to enforce discipline in exercising power in a judicious way in matters relating to administrative and financial functions.

20.2 The Vigilance set up in REC consisting of one CVO, one AGM and three Managers / Sr. Officer, though small, has been an effective managerial tool in enhancing the performance of the Corporation by way of pursuation with functional Divisions to systematize /document the policies/procedures. Presently, there is no CBI case against any employee of the Corporation. Two disciplinary cases and two complaints are pending.

20.3 The Vigilance Awareness Week 2009 was organized during 3-7 November, 2009. Various programmes/lectures were arranged in all offices of REC with a view to create awareness about preventive measures through system improvement and use of information technology.

20.4 In compliance with the instructions of CVC, the sensitive posts in the Corporation have been identified and informed to CVC. HR Deptt. has been advised to rotate the officers working on these posts for a long time.

20.5 Information with a vigilance angle was scrutinized carefully. As a measure for preventive vigilance, policies/ procedures etc. relating to various divisions were reviewed and suggestions were given for improvement. Vigilance Division initiated measures to streamline and strengthen office systems and procedures. All important circulars as and when received from CVC and circulars issued by Vigilance Division from time to time are regularly placed on REC intranet for information of all the Zonal Offices, Project Offices/Central Institute for Rural Electrification.

20.6 Agreed lists were finalized in respect of all Zonal Offices/ Project Offices/Central Institute of Rural Electrification in addition to its Corporate Office at Delhi after close interaction with local branches of CBI except in case of Mumbai. Prescribed periodical statistical returns were sent to CVC and MOP on time.

20.7 As a surveillance measure, inspections were carried out by the officers of Vigilance Division in various Zonal/ Project Offices. More than 95% Annual Property Returns of the employees were subjected to systematic scrutiny and clarifications were sought wherever necessary. Phase I of computerization of Annual Property Returns has been completed in which employees will continue to submit APRs in hard copy to HR Division and then HR Division will feed the data in the software.

20.8 Performance of Vigilance Division was reviewed regularly by the CVC, Board of Directors of REC and CMD, REC in addition to constant reviews undertaken by the CVO, REC in accordance with the prescribed norms.

21. IMPLEMENTATION OF OFFICIAL LANGUAGE

21.1 In compliance with the directives of Department of Official Languages, strenuous efforts were made to achieve Annual Programme 2009-10. During the year, usage of Hindi has increased in day to day working of REC. In order to encourage employees, all the incentives schemes introduced by the Government of India have been implemented in REC.

21.2 (i) The Corporation organised nine Hindi competitions separately for General Managers/Executive Directors, Middle level Managers and Non-Executives as well as Sulekh competition for Class IV employees during Hindi Pakhwara from 16.9.2009 to 30.9.2009.

(ii) A Noting/Drafting competition was also organized on 16.9.2009 under the aegis of NARAKAS (Upkram) Delhi.

(iii) A Prize Distribution Function was organised on 20.11.2009. Winners of these competitions were awarded prizes by Shri P.Uma Shankar, CMD, REC, Dr. P.C.Tandan, Senior Reader and Shri Saraswat Mohan Manishi, Famous Poet.

(iv) Mr. Manishi and other wellknown Hindi Poets enthralled the audience with their poetic talents and presentations at a function organised by REC.

(v) Cash Prizes and Certificates were given to encourage employees for doing their Original Work in Hindi.

21.3 Four quarterly review meetings of Official Language Implementation Committee were held during the year under the Chairmanship of CMD, in which detailed discussions were held to review the progress and suggest measures to overcome any difficulties in order to achieve the targets.

21.4 Six periodical inspections were carried out to assess the progressive use of Hindi in various divisions of Corporate Office and suggestions were given to improve the shortcomings. During the year, seven Project Offices were also inspected. Ministry of Powers officials have also been associated during inspection in some Project Offices. The Officers of Ministry of Power as well as Department of Official Language (Rajbhasha Vibhag) inspected RECs progress of Hindi work at Corporate Office on 21.10.2009 and 28.1.2010. The progress of Hindi at Corporate office was also reviewed by Ministry of Power in their Official Language Implementation Committee meeting held on 13.8.2009.

21.5 The Corporation has been honoured with RAJBHASHA SHRI SAMMAN by Bharatiya Rajbhasha Vikas Sansthan, Dehradun. Zonal office, Panchkula has been awarded second prize by NARAKAS, Chandigarh for doing excellent work in Hindi for the year 2008-09.

21.6 In order to increase the use of Hindi by all in official work, 8 Hindi workshops were organized in Corporate Office in which 111 officers/employees participated.

21.7 A meeting on the topic of "Shabdavali Nirman related to Power Sector" was also organized by the Corporation in its premises under the aegis of Ministry of Power from 16th to 18th November, 2009.

21.8 Maintenance 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.

21.9 RECs website is available both in Hindi and English and is being updated from time to time. Billingual working facilities have been made available on all computers. All publications, reports, memoranda, 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. Seven books of CIREs Training material were translated into Hindi and made available for the benefit of trainees.

22 . MOU WITH MINISTRY OF POWER

The performance of REC in terms of Memorandum of Understanding signed with the Government of India in the Ministry of Power for the financial year 2008-09 has been rated as "Excellent". This is the 16th 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 Fiscal 2010 also, the performance of the Company is poised to receive "Excellent" rating.

23. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

Following is the CSR Policy as approved by the Board of Directors of REC in May, 2008.

"To remain a responsible corporate entity mindful of its social responsibilities to all stakeholders including consumers, shareholders, employees, local community and society at large."

The details of the policy are posted on the RECs website i.e. www.recindia.nic.in.

23.1 CSR Activities

For the second year in a row, REC set aside a sum equivalent to 0.25 % of Profit after Tax (PAT) of previous fiscal, i.e Rs. 318 Lakh as allocation towards CSR activities for fiscal 2010. A separate society by the name "REC Foundation" has been constituted to take up the CSR work in a strategic and exclusive manner. A number of proposals are in various stages including a project to support children who are/have been victims of communal disruption across the country. Called "Project Assist" this project is being implemented by the National Foundation for Communal Harmony (NFCH). In another initiative, REC sponsored construction of a Training Centre for physically handicapped persons, to provide vocational training to them. The project is being implemented by Amar Seva Sangam, Chennai. In another project, REC has contributed three vehicles for distribution of food under the mid-day meal program for children of government schools.

24. BOARD OF DIRECTORS

Government of India, Ministry of Power, has appointed Dr. J. M. Phatak, IAS (MH:78), as Chairman and Managing Director (CMD) of the Company with effect from the afternoon of 15th June, 2010 and Shri P.Uma Shankar has relinquished charge as CMD, REC w.e.f. 15th June, 2010 (forenoon).

In accordance with the provisions of Articles 82 (4) of the Articles of Association of the Company, two Independent Directors i.e. Shri V.N. Dhoot and Dr. Devi Singh shall retire by rotation at the ensuing Annual General Meeting of the company and, being eligible, offer themselves for re- appointment.

Board Meeting in Progress

25. SUBSIDIARY COMPANIES

Your Company has formed five subsidiary companies for undertaking specific business activities. The names of these companies, dates of their formation and the percentage of ownership interest in these Companies are as follows:-

Sl. Name of Subsidiary Company Date of Percentage No. Formation of ownership interest

1. REC Transmission Projects Company Limited (RECTPCL) (a wholly owned subsidiary of REC) 08.01.2007 100%

2. North Karanpura Transmission Company Limited (NKTCL)* (a wholly owned subsidiary of RECTPCL) 23.04.2007 100%

3. Talcher II Transmission Company Limited (TTCL)* (a wholly owned subsidiary of RECTPCL) 01.05.2007 100%

4. REC Power Distribution Company Limited (RECPDCL) (a wholly owned subsidiary of REC) 12.07.2007 100%

5. Raichur Sholapur Transmission Company Limited (RSTCL) (a wholly owned subsidiary of RECTPCL) 19.11.2009 100%

*NKTCL and TTCL have been transferred to M/s Reliance Power Transmission Limited on 20.05.2010 and 27.04.2010 respectively.

25.1 REC Transmission Projects Company Ltd. (RECTPCL)

RECTPCL had issued Letters of Intent on 18.12.2009 to successful bidder i.e. M/s. Reliance Power Transmission Ltd. for transfer of North Karanpura Transmission Company Ltd. (NKTCL) and Talcher-II Transmission Company Ltd. (TTCL). These two subsidiary companies / SPVs viz. TTCL and NKTCL were handed over to M/s. Reliance Power Transmission Limited on 27.4.2010 and 20.05.2010 respectively.

RECTPCL has taken up the task of selection of developer for the third transmission project i.e. 765 KV S/C Line-I Raichur-Sholapur Transmission System entrusted to REC. Technical Consultants and Bid Process Consultants have already been appointed to assist RECTPCL in this process. Global Invitation for submission of response to Request for Qualification (RfQ) was issued on 26.2.2010. Response to RfQ was opened on 26.4.2010. 35 bidders have submitted their response, which are under evaluation.

25.2 Financial Performance during 2009-10

The summary of Financial Operations in respect of REC Transmission Projects Company Limited (RECTPCL) is appended below :

Particulars For the year For the year ended ended 31.3.2010 (Rs.) 31.3.2009 (Rs.)

Total Income 300,034,552 -

Total Expenditure 22,542,251 21,297,234

Less: Expenses allocated to the three wholly owned subsidiaries -

(a) North Karanpura Transmission Company

Limited (NKTCL) 10,199,137 12,114,371

(b) Talcher II Transmission Company Limited (TTCL) 9,154,380 9,182,863

(c) Raichur Sholapur Transmission Company limited (RSTCL) 3,124,417 -

(d) Unallocated absorbed by Company 64,317 -

Profit Before Tax 299,970,235 -

Provision for Tax 101,959,883 - Profit after Tax carried to Balance Sheet 198,010,352 -

Since the three subsidiaries of RECTPCL, namely NKTCL, TTCL and RSTCL were yet to commence its commercial operations, no Profit & Loss Account was prepared for those subsidiaries for the financial year ended 31st March, 2010. In place thereof, a Statement of Incidental Expenditure during Construction Period was prepared. The total expenditure of Rs.1,02,89,726/-, Rs.92,11,685/- and Rs.31,06,104/- was incurred during the year ended 31st March, 2010 for NKTCL, TTCL and RSTCL respectively which has been shown under Capital Work in Progress of the subsidiaries.

25.3 REC Power Distribution Company Limited (RECPDCL).

During the year 2009-10, RECPDCL secured orders from 4 Discoms namely MSEDCL, WBSEDCL, BESCOM, and

Electricity Department of Manipur for third party inspections of 24755 villages in 30 districts of 4 states which will accrue Rs.21 crore gross income to the company. The company has established its material inspections wing to inspect material under RGGVY & FRP works at manufacturers facilities. The company has also taken new initiatives by empanelling 16 business associates / agencies for taking projects in IT implementation and consultancy.

During the year ended 31st March, 2010, third party inspection of about 15000 villages and 990 feeders were completed by the company. In addition to this, material inspections of more than 45000 Distribution Transformers were completed.

25.4 Financial Performance during 2009-10

During the year ended 31st March, 2010, RECPDCL has been able to generate an Income of Rs. 10.01 crore and Profit before Tax & Profit after Tax is Rs. 1.57 crore & Rs. 1.03 crore respectively. It is worthwhile to mention that turnover of the company has doubled this year and net worth reached to Rs.4.18 crore against initial capital injected by REC of Rs.0.05 crore. For the year 2008-09, the company had declared a dividend @ 100% on par value and for the year 2009-10 also, the Board of Directors have proposed a dividend @ 100%.

26. DETAILS OF UNCLAIMED SHARES

The Company went for a maiden public offer of 15,61,20,000 equity shares in February, 2008, which comprised fresh issue of 7,80,60,000 equity shares by the Company and an offer for sale of another equal number of shares by the President of India.

Further, the Company went for a Follow on Public Offer of 17,17,32,000 equity shares in February, 2010 which comprised fresh issue of 12,87,99,000 equity shares by the Company and offer for sale of 4,29,33,000 by the President of India.

The details of unclaimed shares as on 31st March, 2010 is given as under :

Sl. Particulars No. of No. of No. cases shares involved

IPO Ã 1.4.2009 to 31.3.2010

1.Aggregate number of shareholders and the outstanding unclaimed shares as on 1.4.2009 659 56019

2. No. of shareholders who approached for transfer of unclaimed shares during the year. 242 21509

3. Number of shareholders to whom unclaimed share were transferred. 242 21509

4.Aggregate number of shareholders and the outstanding unclaimed shares as on 31.3.2010. 417 34510

Sl. Particulars No. of No. of No. cases shares involved

FPO Ã 6.3.2010 to 31.3.2010

1. Aggregate number of shareholders and the outstanding unclaimed shares as on 6.3.2010 205 50790

2. No. of shareholders who approached for transfer of unclaimed shares during the year. 119 32370

3. Number of shareholders to whom unclaimed share were transferred. 119 32370

4. Aggregate number of shareholders and the outstanding unclaimed shares as on 31.3.2010. 86 18420

27. FINANCIAL STATEMENTS / DOCUMENTS UNDER SECTION 212 OF THE COMPANIES ACT, 1956.

On an application made by the Company, the Ministry of Corporate Affairs, Government of India, vide its letter dated 18.5.2010 has granted exemption to your Company from attaching the financial statements of its subsidiary companies for the financial year 2009-10, pursuant to Section 212(8) of the Companies Act, 1956. Accordingly, copies of the balance sheet, profit and loss account and reports of the board of directors and auditors of the subsidiaries have not been attached with the balance sheet of the Company. 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, the financial data of the subsidiaries has been furnished in the Notes on consolidated financial statements, which forms part of the Annual Report. The annual accounts of the Company including that of 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.

28. 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 Companys Report on Compliance with Corporate Governance II Certificate on Corporate Governance issued by the Joint Statutory Auditors of the Company III Statement pursuant to Section 212 (1) (e) of the Companies Act, 1956 relating to subsidiary companies. IV

29. STATUTORY AUDITORS

M/s K.G. Somani & Co., Chartered Accountants, New Delhi and M/s Bansal & Co., Chartered Accountants, New Delhi, were appointed as Joint Statutory Auditors of your Company for the financial year 2009-10 by the Comptroller and Auditor General of India (C & AG). The Joint Statutory Auditors have audited the Accounts of the Company for the year ended 31st March, 2010 and they have not made any qualifications in their Report on the Audited Accounts. Following documents are annexed to this Report:

a) Auditors Report on the Audited Accounts of the Company for the year ended 31st March 2010;

b) Auditors Report on the Consolidated Financial Statements of the Company and its Subsidiaries;

c) Non-Banking Financial Companies Auditors Report.

d) Audited Accounts and Cash Flow Statement of the Company for the year ended 31st March 2010;

e) Annexure to be enclosed with the audited Balance Sheet for NBFC Companies as prescribed by RBI;

f) Audited consolidated Financial Statements of the Company for the year ended 31st March 2010;

30. COMMENTS OF C&AG OF INDIA

Comments of the Comptroller and Auditor General of India dated 09.07.2010 on the Accounts of the Company for the year ended 31st March, 2010 is enclosed. It is reported therein that on the basis of audit, nothing significant has come to their knowledge which would give rise to any comment upon or supplement to Statutory Auditors Report under Section 619(4) of the Companies Act, 1956.

31. RIGHT TO INFORMATION ACT, 2005

Necessary action has been taken by the Corporation towards implementation of Right To Information (RTI) Act, 2005 in REC. An independent RTI Cell has been created to ensure compliance of the provisions of the RTI Act and attending to the requests for information. REC website has been updated and contains information on all the 17 items as required under Clause 4.1(b) of RTI Act, 2005.

RTI MACHINERY IN REC

CORPORATE OFFICE:

(A) Asstt. Public Information Officer

Shri Vinay Kumar Kesarwani, Manager (Law)

(B) Public Information Officer

Shri B.R.Raghunandan,

Executive Director & Company Secretary

(C) Appellate Authority

Shri Kamal Dayani, Executive Director

32. ACKNOWLEDGEMENTS

The Directors are grateful to the Government of India particularly the Ministries of Power & Finance, the Planning Commission and the Reserve Bank of India for their continued co-operation, support and guidance in effective management of Companys affairs and resources.

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

The Directors also place on record their sincere appreciation for the continued support and goodwill of the esteemed Investors in REC Bonds, Banks, Life Insurance Corporation, KfW of Germany, JICA of Japan and Asian Development Bank (ADB) in the fund raising programmes of the Company.

The Directors also thank the Joint Statutory Auditors M/s K.G. Somani & Co. and M/s Bansal & Co., and the Comptroller & Auditor General of India for their valued cooperation.

The Directors also sincerely appreciate and thank the employees of the Company at all levels 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

New Delhi (Dr. J.M. Phatak)

July 22, 2010 Chairman & Managing Director

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