REC asks AP govt to extend 30% guarantee for APTransco loan

Apart from the much-needed loan assistance to strengthen the power system, the Government of India's Rural Electrification Corporation (REC) has also provided relief to the Andhra Pradesh government.

REC has asked the state government to extend guarantee for just 30 per cent of the total loan amount of Rs 3,772.54 crore that is newly being offered to the Andhra Pradesh Transmission Corporation (APTransco).

Of the total loan amount, Rs 2,729 crore is earmarked for replacing the existing low tension (LT) distribution system with the high voltage direct current (HVDC) system in seven districts where nearly half of the 23 lakh agricultural pumpsets are located. The remaining amount will be utilised by APTransco and discoms for establishing new power substations and electrification requirements.

The state government is required to give guarantee for only Rs 1,131 crore as against the total loan amount, which is scheduled to be spent during 2005-08.

Apart from several advantages from the HVDC system, including drastic reduction in transmission and distribution losses, the required guarantee for just 30 per cent of the loan amount enables the government to provide more guarantees for other such borrowings.

The state governments cannot give unlimited guarantees for loans as the Reserve Bank of India (RBI) has put an upper limit to this provision in a year.

The state cabinet, which met here yesterday, approved the government's decision to provide guarantee for the loan being received by APTransco from REC.

HVDC system, which was implemented on a pilot basis in some areas like Warangal, is expected to eliminate theft and unauthorised usage of power. The state government is aiming to contain losses in the power sector to partly absorb the burden of the free power scheme.

It also helps discoms ensure quality supply to its consumers. The government plans to replace the low voltage distribution system in the entire state in a phased manner.

This is the second major initiative in the Andhra Pradesh power distribution system after the steps initiated three years back to establish separate feeders for domestic, agricultural and industrial requirements.