REC to provide Rs 16000 cr to TN electricity board

State-owned Rural Electrification Corporation (REC) will extend Rs 16,000 crore financial assistance to the Tamil Nadu Electricity Board (TNEB) for augmenting the latter's power generation capacity as well as strengthen its transmission and distribution network over the next five years.

The financial assistance, which will be provided during the Eleventh Five Year Plan (2007-2012), will be the biggest cumulative sanction to Tamil Nadu by REC.

A memorandum of understanding to the effect between REC and TNEB was signed on Monday at the state secretariat in the presence of Tamil Nadu chief minister M Karunanidhi.

TNEB has chalked out a plan to increase capacity by 2,500 Mw by augmenting its installed capacity at the existing thermal stations in Chennai, Mettur and Tuticorin in addition to pumped storage capacity of 500 Mw in the Nilgiris.

This capacity addition over the next five years would not only result in generation of additional power, but also strengthen the power transmission and distribution network throughout the state, according to an official release.

Of the Rs 16,000 crore, Rs 10,500 crore will be spent on augmenting power generation capacity at five stations, Rs 2,550 crore for transmission and distribution schemes and Rs 3,000 crore on power evacuation schemes at the five stations.

Talking to reporters, Anil Kumar Lakhina, chairman and managing director, REC, said Tamil Nadu was in a happy position with lower distribution losses of 18 per cent as compared with the national average of 33 per cent.

However, the ideal rate would be 7-8 per cent, according to Indian conditions and TNEB should work to bring it down further, he added.

REC has provided financial assistance to Tamil Nadu to the tune of Rs 5,000 crore in the past.

S Kathiresan, member - accounts, TNEB, said the electricity board was getting loans from REC at cheaper rates. While the loan for generation schemes will be offered at 10 per cent, the loan for transmission and distribution schemes at 9.75 per cent. The tenure of the loan will be for 13 years with an option to reset the interest after three years.

With total revenues of Rs 16,000 crore, TNEB's present borrowing limit is estimated to be about Rs 5,000 crore.

However, the board's borrowing capacity will correspondingly increase with more generation and growth in revenues in the near future, he added.