Final project of REC

8/7/2019 Final project of REC

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A

Project Report

On

ERP SYSTEM AT RURAL ELECTRIFICATION CORPORATION LIMITED

45 Days Summer Training Project with

RURAL ELECTRIFICATION CORPORATION, New Delhi

SUBMITTED BY

RAJESH KHANDELWAL

MBA III Semester

Poornima School of Management

ISI 2, RIICO Institutional Area, Goner Road, Sitapura, Jaipur


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Poornima School of Management

(ISI 2, Goner Road, Sitapura, Jaipur)

CIRTIFICATE OF

Summer Project/Training during June July, 2010

Certified that Mr. / Ms. Rajesh Khandelwal, student of Master of Business Administration III

Semester has submitted his report on ERP AT RURAL ELECTRIFICATION

CORPORATION after successfully completing the summer practical training at RURAL

ELECTRIFICATION CORPORATION, DELHI from June 17th to August 1st 2010, towards

fulfillment of the syllabus requirement prescribed by Rajasthan technical University, Kota for

MBA III semester Paper.

Vandana Sharma

Director, PSOM


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ACKNOWLEDGEMENT

The completion of any project depends upon the co-operation, coordination and combined

efforts of several resources of knowledge, inspiration and energy. Words fall short

acknowledging immense support lent to me yet I will try to give full credit to the deservers.

My sincere thanks goes to MR. AJAY CHOUDHARY (Sr. Manager, Finance REC), with

generous feeling I am expressing deep sense of gratitude to my Project guide, MR.

SONKAR SIR (Sr. Officer Finance), Mr. SUMIT MEHRA ( A.O.,F&A) and Mr. PAWAN

CHOUDHARY (Acc. Officer, F&A). Their valuable guidance, continuous encouragement and

tremendous patience in discussing my problems have been of the greatest help in bringing

out my task in present shape.

I am thankful to Mr. V.K. ARORA (Executive Director HR, REC) for providing me an

opportunity of executing summer training in the corporate office Scope complex, Lodhi Road,

New Delhi.

I convey my thanks to Mr. R.K. Agarwal (Advisor Deptt. Of management Studies PGC) for

providing me the opportunity to work with Rural Electrification Corporation Limited.

I convey my thanks to Miss Neha Sarda(Faculty DMS) for helping me in guiding & building

the project.

I shall be falling in my duty if I dont express my gratefulness to my parents, my colleagues,

my teachers, my friends and REC staff members for the moral support and encouragement

given to me.

(Signature of Student)

RAJESH KHANDELWAL


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Rural Electrification CorporationA Government of India Enterprise

Preface

Rural Electrification Corporation Limited (REC) was incorporated on July 25, 1969 under the

Companies Act 1956. REC is a listed Government of India Public Sector Enterprise with a

net worth of Rs. 11,080 Crore as on 31.03.10. Its main objective is to finance and promote

rural electrification projects all over the country. It provides financial assistance to State

Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural

electrification projects as are sponsored by them.

REC provides loan assistance to SEBs/State Power Utilities for investments in rural

electrification schemes through its Corporate Office located at New Delhi and 17 field units

(Project Offices), which are located in most of the States.

The Project Offices in the States coordinate the programmes of RECs financing with the

concerned SEBs/State Power Utilities and facilitate in formulation of schemes, loan sanction

and disbursement and implementation of schemes by the concerned SEBs/State PowerUtilities.

For Fiscal 2009, more than half of its loan sanctions related to generation projects and

generation-related loan assets currently comprise more than a third of its total loan assets. In

September 2009, its mandate was further extended to include financing other activities with

linkages to power projects, such as coal and other mining activities, fuel supply

arrangements for the power sector and other power-related infrastructure.


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1. Executive Summary

Rural Electrification Corporation Limited (REC) was incorporated on July 25, 1969 under the

Companies Act 1956. REC is a listed Government of India Public Sector Enterprise with anet worth of Rs. 11,080 Crore as on 31.03.10. Its main objective is to finance and promote

rural electrification projects all over the country. It provides financial assistance to State

Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural

electrification projects as are sponsored by them.

My Project is related to ERP System at REC. With the help of ERP we can do work in an

easiest manner. The feature of ERP is as follows:

Proper management of the data.

Creating a Database.

Easiest accessible.

Connecting through networking etc.


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2. Industry Profile

2.1 STRUCTURE OF THE INDIAN POWER SECTOR

Generation

Generation generally refers to the bulk production of electric power for industrial, residential

and rural use. According to data from the CEA, as on September 30, 2007, India's power

generation systems had a total installed capacity of around 135,782 MW of which central

power sector utilities accounted for approximately 34%, state sector entities accounted for

approximately 52.25% and private sector companies accounted for approximately 13.75%.

Public sector- In India, control over the development of the power industry is shared

between the central and the state governments. Central sector utilities were created in 1975

under administrative control of the MoP. State governments have set up state utilities that are

responsible for ensuring the supply, transmission and distribution of electricity in the most

economical and efficient manner. One of the key changes introduced by the Electricity Act is

the elimination of the legal basis for the continuation of SEBs. It is intended that SEBs will be

completely restructured and their assets unbundled into separate generation, transmission,

and distribution companies. The SEBs of Orissa, Haryana, Andhra Pradesh, Karnataka, Uttar

Pradesh, Uttaranchal Rajasthan, Delhi, Maharashtra, Gujarat, Assam and Madhya Pradesh

have been unbundled as on December 10, 2007.

Private sector- In 1991 the GoI began to encourage private sector participation in the power

industry. The Electricity Act allows for increased private involvement in power sector

development. In particular it has introduced significant changes in the industry, notably by

moving the sector from a single-buyer market to a multi-buyer and multi-seller system. The

aim is to give the private sector access to the state electricity board transmission grids

thereby allowing private power producers to sell directly to large industrial consumers. The

significant private power sector participants include Tata Power Limited and Reliance Energy

Limited. Captive power generation. The electricity supply industry in India is also


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characterized by a large amount of captive generation, which has been established by

energy intensive industries such as steel and aluminium. Under the Electricity Act, captive

generators are able to sell excess power to consumers. For Fiscal 2007, the total installed

capacity of captive power plants with capacity of 1 MW and above was 19,485 MW. Out of

this, about 14,866 MW of captive generating capacity is connected to the grid and balance

4,619 MW is operating in isolation meeting their own captive power requirements.

Investments in generation- According to the Report of the Working Group on Power for

Eleventh Plan, the total fund requirement for generation projects, during the Eleventh Plan

period is estimated at Rs. 4,108,960 million, with Rs. 2,020,670 million being required for the

central sector, Rs. 1,237,920 million being required for the state sector and Rs. 850,370

million being required for the private sector. The total fund requirement includes the fund

requirement estimated at Rs. 1,891,950 million for start-up generation projects benefiting in

the Twelfth Plan.

Investments in transmission- According to the Report of the Working Group on Power for

Eleventh Plan, the total fund requirement for transmission system development and related

schemes during the Eleventh Plan period is estimated at Rs. 1,400,000 million, with Rs.

750,000 million being required for the central sector and Rs. 650,000 million being required

for the state sector.

Distribution

Power distribution is a critical link between generation, transmission and end users of power.

As a result of high transmission, distribution and commercial losses and the poor financial

health of bulk power purchasers (SEBs and SPUs), investments in the distribution sector

have been relatively low and the growth and maintenance of distribution systems in India hasbeen poor. The poor financial health of SEB's and SPU's historically affects their ability to

invest in new generation capacity, to update their transmission and distribution network and

to undertake any system improvement. With distribution being the weakest link in the chain of

power supply, distribution reforms have been identified as a key area of focus in the power

sector reform process.


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2.2 PROVIDERS OF FINANCE TO THE POWER SECTOR IN INDIA

The primary providers of power sector financing in India are power sector specificgovernment companies, financing institutions, public sector banks and other public sector

institutions, multilateral development institutions and private banks.

Power-Sector Specific Government Companies

Besides REC Company, the other sector - specific companies owned by GoI and engaged in

financing power sector are as follows:

Power Finance Corporation Limited- In order to provide funds for the power projects in

India and to act as developmental financial institution for the power sector in India, PFC was

incorporated on July 16, 1986. PFC is a Public Sector Undertaking and its main objective is

to raise resources from international and domestic sources at competitive rates and terms

and conditions and on-ward lend these funds on optimum basis to the power projects in

India. PFC has been actively persuading State Governments to initiate reform and

restructuring of their power sector in order to make them commercially viable and in this

regard, is providing financial assistance to reform-minded States under relaxed lending

criteria/exposure limit norms. It is also providing funds based services like Term Loans,

Equipment Leasing, Bill Discounting, Buyers Line of Credit and also non funds based

services like Guarantee Services

and Consultancy Services.

Indian Renewable Energy Development Agency- The Indian Renewable Energy

Development Agency ("IREDA") was established in 1987 as a public sector NBFC under the

Ministry of Non-Conventional Energy Sources with the objective of promoting, developing

and extending financial assistance for renewable energy and energy efficiency, and energy

conservation projects. IREDA is playing a key role in the development of renewable energy in

India.


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Financial Institutions

Financial institutions were established to provide medium-term and long-term financial

assistance to various industries for setting up new projects and for the expansion andmodernization of existing facilities. These institutions provide fund based and non-fund based

assistance to industry in the form of loans, underwriting, direct subscription to shares,

debentures and guarantees. The primary long-term lending institutions include IDFC Limited,

IIFC Limited, IFCI Limited,

Industrial Investment Bank of India Limited and Small Industries

Development Bank of India

State Level Financial Institutions

State financial corporations operate at the state level and form an integral part of the

institutional financing system. State financial corporations were set up to finance and

promote small and medium-sized enterprises. At the state level, there are also state

industrial development corporations, which provide finance primarily to medium-sized and

large-sized enterprises.

Public Sector Banks and other Public Sector Institutions

Public sector banks make up the largest category of banks in the Indian banking system. The

primary public sector banks operating in the power sector financing include the Industrial

Development Bank of India, State Bank of India, Punjab National Bank and the Bank of

Baroda. Other public sector entities such as the Life Insurance Corporation of India also

provide financing to the power sector.

Private Sector Banks

After the first phase of bank nationalization was completed in 1969 the majority of Indian


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banks were public sector banks. Some of the existing private sector banks, which showed

signs of an eventual default, were merged with state owned banks. In July 1993, as part of

the banking reform process and as a measure to induce competition in the banking sector,

the RBI permitted entry by the private sector into the banking system. This resulted in the

introduction of nine private sector banks. These banks are collectively known as the ''new''

private sector banks. These institutions also provide fund based and non-fund based

assistance to industry in the form of loans, underwriting, direct subscription to shares,

debentures and guarantees and will compete in this sector.

International Development Financial Institutions

International development financial institutions are supportive of power sector reform and of

more general economic reforms aimed at mobilizing investment and increasing energy

efficiency. The primary international development financial institutions involved in power

sector lending in India include several international banking institutions such as Japan Bank

for International Cooperation, Kreditanstalt fur Wiederaufbau, the World Bank, the Asian

Development Bank and the International Finance Corporation. In the early 1990s, the World

Bank decided to finance mainly projects in states that "demonstrate a commitment to

implement a comprehensive reform of their power sector, privatise distribution, and facilitate

private participation in generation and environment reforms". Recent loans from the World

Bank have gone to support the restructuring of SEBs. In general, the loans are for

rehabilitation and capacity increase of the transmission and distribution systems, and for

improvements in metering the power systems in states that have agreed to reform their

power sector. The overall strategy of the Asian Development Bank for the power sector is to

support restructuring, especially the promotion of competition and private sector participation.

Like the World Bank, the ADB also provides loans for restructuring the power sector in the

states and improving transmission and distribution.

Other Provisions for Power Sector Finance

There also exist several short term and long term financing measures by the GoI to facilitate

the financial viability of the power sector, such as the implementation of the Electricity Act. As


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a long term financing measure, the process has been initiated for institutionalizing

mechanism for facilitating and accelerating private and foreign direct investment into the

power sector.


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3. Company Profile

REC is one of the leading public financial institutions in Indian power infrastructure. It is

engaged in the financing and promotion of transmission, distribution and generation projects

throughout India. It believes the organization occupies a key position in the GoI's plans for

the growth of the Indian power sector.

REC commenced its operations in 1969 for the purpose of developing the power

infrastructure in rural areas. Its scheme has historically aimed at extending and improving the

supply of electricity in agricultural pump sets. Through its funding of transmission and

distribution projects in rural areas, it has contributed to the development of rural India and

India's agriculture. Although its emphasis continues to be on the development ofelectrification of rural areas, its mandate has evolved in accordance with the development

priorities of the GoI and permits us to finance all segments of the power sector throughout

the country. It provides funding to its clients and assist them in formulating and implementing

various types of power project related schemes. its clients include public sector power utilities

at the central and state levels and private sector power utilities. Additionally, they fund power

projects for its joint sector clients. its financial products primarily include long-term loans,

short-term loans, bridge loans and debt refinancing.

3.1 REC Business

Transmission and Distribution Projects

Within transmission, the principal projects REC finance for the evacuation of power from new

power generation stations and the augmentation or strengthening of existing transmission

systems. In distribution, the principal projects they finance are for system improvement to

reduce distribution losses and the creation of new distribution systems.


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Transmission projects- Transmission projects are projects that relate to the transmission of

electricity at higher voltages (132 KV, 220 KV or 400 KV) over relatively long distances,

generally from generation facilities to sub-stations or between sub-stations. REC finance

projects related to transmission systems, sub-transmission systems, power evacuation lines

and transmission links.

Distribution projects- Distribution projects are projects that relate to the distribution of

electricity at relatively lower voltages (66 KV, 33 KV, 11 KV or 415 V) over shorter distances,

generally from sub-stations to end-users or between sub-stations. Its distribution projects

involve creating additional infrastructure through the erection of new sub-stations and lines

and the improvement of the existing distribution systems by upgrading existing sub-stations

and lines to increase capacity and reduce losses. Distribution projects also include the

modernization of distribution systems to reduce the losses of power utilities.

Generation Projects

In generation, the principal projects REC finance for the creation of new generation capacity.

Thermal energy power generation projects- REC currently finance thermal energy power

generation projects in the public sector, joint sector and private sector. Thermal energy

power generation projects include coal-based power plants, gas based combined cycle

power plants, captive co-generation power plants and biomass based power plants.

Hydro energy power generation projects- REC provide financing to hydro energy power

generation in the public sector, joint sector and private sector. Hydro energy power

generation projects include projects of varying sizes, from large hydro, small hydro and mini

hydro power plants.


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3.2 REC Products

REC principal products are long-term loans and short-term loans. Additionally, it offer debt

refinancing and bridge loans. All of our financial products are denominated in Rupees.

Financial Product

y Long-term loans

y Short-term loans

y Debt refinancing

y Bridge loans

Long-term Loans

REC offer long-term loans to central sector power utilities, state sector power utilities, joint

sector power utilities, state power departments, private sector power utilities and rural

electricity co-operatives. Its long-term loans generally are sanctioned with respect to a

specific power-related project at project inception or as bulk loans for general transmission

and distribution system improvements. In the transmission and distribution sector, we

generally provide long-term loans of 90% to 100% of the funding required for the powerproject, depending on the nature of the project and the type of borrower. In the generation

sector, we generally provide long-terms loans of up to 50% of the project cost for private

sector borrowers and 80% for government sector borrowers. Both types of long-term loans

are disbursed in one or more installments. The first disbursement is intended to allow our

borrowers to fund initial procurement related to the project. Upon satisfactory completion of

the initial procurement stage and evidence of fund utilization, we will make additional loan

disbursements, subject to our satisfactory receipt of evidence of fund utilization. In the

transmission and distribution sector, our long-term loans typically have a maturity of up to

thirteen years from the date of the first disbursement, inclusive of a three year moratorium

period on payment of principal. In the generation sector, its long-term loans have a maturity

of up to 20 years, inclusive of a moratorium period of up to 5 years on payment of principal.


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Short-term Loans

REC offer short-term loans to our state sector borrowers to meet their immediate working

capital requirements, including for the purchase of fuel for power plants, system and network

maintenance, including transformer repairs, the purchase of power, the purchase of materials

and minor equipment.

Debt Refinancing

REC assists borrowers in the power sector to reduce their cost of borrowings by offering

access to a debt refinancing scheme. Under this scheme, we assist borrowers who have

borrowed funds from other lending institutions at a higher rate of interest to refinance their

loans at a lower interest rate. The refinancing facility is available generally for commissionedprojects. REC offer debt refinancing products on the same interest rate terms as our long-

term loans; however, the maturity of our debt refinancing products is generally not later than

the maturity of the refinanced indebtedness.

Bridge Loans

REC provide short-term bridge loan financing for borrowers that have been sanctioned

financial assistance from or through us, primarily in the form of grants or long-term loans, andhave received a sanction letter for the funding but are awaiting disbursements pending

formalities or clearances.

Short- and Medium-term Loans to Equipment Manufacturers

REC offer short-term loans (of up to one year) and medium-term loans (between one and five

years) to manufacturers of equipment or materials. To be eligible to receive these loans the

equipment manufacturers must have been awarded a firm order for executing contracts inpower projects in India by power utilities. REC does not currently has any such loans

outstanding.


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Equipment Leasing

REC offer lease financing to fund the purchase of major capital equipment and machinery

essential for power and associated infrastructure projects. REC does not currently have any

such financing arrangements outstanding.

Medium-term loans

On July 10, 2007, our Board of Directors approved REC Company to offer medium-term

loans to state sector borrowers to fund the purchase of major capital equipment. REC

medium-term loans will bear a fixed rate of interest and have a maturity of two to five years.

The medium term loans will provide the borrower the option to repay principal in monthly or

quarterly installments. REC does not intend to ordinarily permit pre-payment of our medium-

term loans but may do so at it discretion on the terms of our then prevailing policy for pre-

payment penalties.

3.3The Sectors of Borrowers

REC business is to sanction and disburse loans to central and state sector, joint sector and

private sector borrowers, as well as to rural electricity cooperatives.

Sector

Public sector

Joint sector

Private sector

OUR PARTICIPATION IN GOVERNMENT PROGRAMMES

The GoaI has initiated a number of programmes aimed at accelerating the growth and

development of the power sector. REC play a key role in implementing the following

programmes.


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Rajiv Gandhi Grameen Vidyutikaran Yojana

In Fiscal 2006, the GoI initiated the RGGVY, which has as its objectives the electrification of

all villages and providing access to electricity to all rural households in the country, including

the electrification of un-electrified, below poverty line households. REC has been appointed a

nodal agency for implementing the scheme it will be responsible for complete oversight of the

programme from conception to completion.

RESOURCE MOBILIZATION

REC generally funds our assets, primarily comprising loans to the power sector, with

borrowings of various maturities in the domestic and international markets. REC market

borrowings include bonds, short-term loans, medium-term loans, long-term loans and

external commercial borrowings.

Domestic Borrowings

In terms of domestic resources, a significant proportion of our Rupee denominated funds are

raised through privately placed bond issues in the domestic market and term loans. REC has

a diverse investor base of banks, financial institutions, mutual funds, insurance companies,

provident fund trusts, gratuity fund trusts and superannuation trusts and individuals.

Infrastructure bonds- REC began issuing its Infrastructure Bonds in Fiscal 2002. Under

provisions of the Income Tax Act 1961, investments in these bonds offset taxable income,

subject to limitations and qualifications, and they are therefore able to price such bonds at a

lower rate of interest than would otherwise be available to us. The availability of the tax

exemption in connection with these bonds is reviewed annually by the GoI in connection with

the annual implementation of the Finance Act.

Loans from the GoI- As on September 30, 2007, REC had a total of 41 Rupee-denominated

unsecured loans from the GoI. These loans are unsecured, have a maturity of 30 years and

have a five-year moratorium on payment of principal.


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3.4 CREDIT RATINGS OF REC

Domestic Ratings

CRISIL Limited has assigned a domestic rating of"AAA/Stable" to our long-term borrowings

for Fiscal 2008 CRISIL's.

ICRA Limited has assigned a domestic rating of "LAAA" to our long-term borrowing

programme for the Fiscal 2008. The rating of "LAAA" is the highest credit quality rating

assigned by ICRA, on a scale of LAAA to LD to long term debt instruments and implies that

the rated instrument carries the lowest credit risk.

Fitch has assigned a domestic rating of"AAA(ind)" to its long-term borrowing programme for

Fiscal 2008. Fitch's long term credit rating of"AAA(ind)" denotes the highest rating assigned

in its national rating scale and is deemed to imply that this is the "best" credit risk relative to

all other issuers or issues in the country. Normally this rating will be assigned to all financial

commitments issued or guaranteed by the sovereign state. The suffix "(ind)" refers to

National Ratings assigned by Fitch and are signified by the addition of an identifier for the

country concerned, such as "AAA (ind)" for National ratings in India. Specific letter grades

are not therefore internationally comparable.

CARE Limited has assigned a domestic rating of "CARE AAA (Triple A)" to our long term

borrowing programme for Fiscal 2008. Instruments with this rating are considered to be of the

best credit quality, offering highest safety for timely servicing of debt obligations. Such

instruments carry minimal credit risk.

International Ratings

Fitch has assigned an international long-term credit rating of"BBB-". Fitch's international

long-term credit rating of"BBB" in the investment grade (the scale being "AAA", "AA", "A"

and "BBB") signifies good credit quality and indicates that there are currently expectations of

low credit risk. The capacity for payment of financial commitments is considered adequate


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but adverse changes in circumstances and economic conditions are more likely to impair this

capacity.

3.5 EMPLOYEE DEVELOPMENT AND TRAINING

REC believes that its human resources policy is a key driver in the growth of our enterprise.

They have undertaken to create a performance-based culture within our organization.

Promotion and Recruitment

They seek executive level talent both from within our organization and from external sources.

To promote talent from within the organization, they have recently established a policy aimed

at annually inducting 20 trainees in our executive training programme in various disciplines

such as finance, technical areas, information technology and human resources.

Training and Development

REC attached a great importance to the provision of continuous training to our officials in

order to update them regarding the latest developments in the industry and expand their

knowledge and skills. The training needs of its staff are assessed on a regular basis.


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4. Objectives, Scope & Purpose

To promote and finance projects related to power generation, promotion of

decentralized and non-conventional energy sources, energy conservation, renovation

and maintenance, power distribution with focus on pump set energisation.

To expand and diversify into other related areas and activities like financing of

decentralized power generation projects, use of new and renewable energy sources,

consultancy services, transmission, sub-transmission and distribution systems,

renovation, modernization & maintenance etc. for optimization of reliability of power

supply to rural and urban areas including remote, hill, desert, tribal, reverie and other

difficult/remote areas.

To mobilize funds from various sources including raising of funds from domestic and

international agencies and sanction loans to the State Electricity Boards, Power

Utilities, State Governments, Rural Electric Cooperatives, Non-Government

Organizations (NGOs) and private power developers.

To optimize the rate of economic and financial returns for its operations while fulfilling

the corporate goals viz

laying of power infrastructure; power load development;

rapid socio-economic development of rural and urban areas, and

Technology up-gradation.

To ensure client satisfaction and safeguard customers interests through mutual trust

and self respect within the organization as well as with business partners by effecting

continuous improvement in operations and providing the requisite services.

To assist State Electricity Boards/Power Utilities/State Governments, Rural Electric

Cooperatives and other loanees by providing technical guidance, consultancy

services and training facilities for formulation of economically and financially viable

schemes and for accelerating the growth of rural and urban India.


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In furtherance of the Objective, the main scope and purpose to be achieved by the

Corporation are:

To facilitate availability of electricity for accelerated growth and for enrichment of

quality of life of rural and urban population.

To act as a competitive, client-friendly and development oriented organizations for

financing and promoting projects covering power generation, power conservation,

power transmission and power distribution network in the country.

CATEGORY OF SCHEMES FINANCED BY REC

CATEGORY PURPOSE

Project Household

Electrification

Accelerated Electrification of one Lakh villages and

one crore households

Project Village ElectrificationAims at Electrification of unelectrified villages in a

selected designated area

Project Dalit Basti

Aims at Electrification of unelectrified tribal /dalit

bastis by release of Household, Street Light and other

connections

Project Hamlet Electrification

Aims at Electrification of unelectrified hamlets by

release of Household, Street Light and other

connections

Project Village Electrification

Aims at electrification of new villages including

electrification of left out hamlets in a selected

designated area

Project Intensive Electrification

To cover intensive load development for providing

connections to rural consumers in already electrified

areas

Project Dalit BastiTo cover electrification of dalit bastis located in the

electrified areas by release of house hold and street


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light connections

Project Hamlet Electrification

To cover electrification of hamlets located in the

electrified areas by release of house hold and street

light connections

Project Pumpsets Aims at energisation of pumpsets

Project system Improvement

To strengthen and improve the transmission, sub

transmission and distribution system in the

designated area

Project Comprehensive System

Improvement

To meet system inadequacy of entire system from LT

Distribution to Sub transmission and transmission

level of a given geographical area

SI:Meters, Transformers,

Conductors, capacitors etc.

For procurement and installation of meters,

transformers and capacitors etc.

Short Term Loan

To provide finance to the Power Utilities and State

Governments to meet their working capital

requirement for different purposes, such as purchase

of fuel for power plant, purchase of power, purchase

of material and minor equipment, system and network

maintenance including transformer repairs, etc.

Debt Refinancing

The Scheme aims to facilitate reduction of the cost of

borrowings of State Power Utilities/highly rated

private power utilities by repaying their high cost term

loans raised from other Banks/Financial Institutions

for eligible projects/schemes.

Financing Equipment

manufacturers

To provide Short term Loan/Medium term loan to the

manufacturers of Power/Electrical material for power

project.

RE Cooperatives Development of rural electric cooperative societies


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GenerationCovers all types of schemes irrespective of nature,

size and source of generation.

Financing of Generation Projects by REC

y Upto May 2002, REC used to finance only Mini/Micro Generation Projects upto

25MW capacity. In June 2002, the mandate of REC was expanded to include

financing of all generation projects without limit on size or location.

y REC finances all type of Power Generation Projects like Thermal, Hydel,

Renewable Energy, R&M of existing projects etc.

y The borrowers of REC include State Sector Power Utilities/SEBs, Central

Sector, Joint Sector and Private Sector Power Utilities.

y REC sanctions loan as a sole lender or co-lender or in consortium with or

without the status of lead financer.

y As per the present policy, loans for public sector generation projects are

sanctioned upto a maximum of 80% of project cost i.e. in a Debt Equity Ratio of

80:20 but upto the exposure limit fixed for the Power Utility. For Private Sector

Projects, the financing by REC is limited upto 50% of the project cost or 25% of

the net worth of REC, whichever is less.

y The tenure of loans for generation projects varies between 10 to 15 years with

a suitable moratorium period depending upon a case-to-case basis.

y With a modest beginning in 2002-03, when projects worth Rs.736 crore were

sanctioned, REC till 2008-09 has sanctioned Generation Projects worth

Rs.79772 crore. The details of sanctions during the last 7 years as on

31.3.2009 are as per Annexure-1.


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y REC has formed a separate division for DDG projects which looks after the

sanction of loan for small hydro, biomass, wind energy, solar and co-generation

power projects.

y Major Projects sanctioned so far by REC in state sector include Santaldih TPP

in West Bengal, Lehra Mohabbat TPP in Punjab, Korba(East) and

Korba(West)TPPs in Chhattisgarh, Vijaywada and Kakatiya TPP in Andhra

Pradesh, Bhusawal and Chandrapur TPP in Maharashtra, Tehri HEP in

Uttaranchal, Utran TPP in Gujarat, Durgapur Steel TPP of DVC, Baglihar HEP

in J&K, Anpara-D TPP in Uttar Pradesh, Vallur and North Chennai TPP in

Tamilnadu, Chhabra TPP in Rajasthan, Nabinagar Thermal Power Project in

Bihar etc.

y Major promoters in private sector have also approached REC for finance. In

private sector, REC has sanctioned loan for Karcham Wangtoo HEP in

Himachal Pradesh, Sasan Ultra Mega Power Project, Mahan Superthermal

Power Project and Maheshwar HEP in M.P., Pathadi TPP in Chhattisagrh,

Wardha TPP in Maharashtra, Adani thermal Power Project in Gujarat, Teesta

Stage-III and VI HEP in Sikkim etc.

y Some of the promoters have even approached REC for taking up the role of

lead financier in consortium. At present, REC is acting as lead financier in 100

MW Malana-II Hydro Electric Project in H.P., the 1200 MW Teesta Phase-III

Hydro Electric Project in Sikkim, the 270 MW phase-I and 270 MW Phase-II

coal based thermal power project of Wardha Power Company Pvt. Ltd. in

Maharashtra, the 1200 MW Anpara-C Thermal Power Project in Uttar Pradesh

and the 1320 MW coal based thermal power project of Thermal PowerTech

Corporation (India) Ltd. in Andhra Pradesh.


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An exploratory study is generally based on the secondary data that are readily available. It

does not have formal rigid designs the researcher may have to change this focus or direction,

depending on the availability of new ideas and relationships among variables. An exploratory

study is in the nature of preliminary investigation wherein the researcher himself is not

sufficiently knowledgeable and is, therefore, unable to frame detailed research questions.

Here I have used the past and standard data relating to the funding resources or from where

the resources could be taken.


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6. Enterprise resource planning

Enterprise resource planning (ERP) is an Integrated computer-based system used to

manage internal and external resources including tangible assets, financial resources,

materials, and human resources. It is a software architecture whose purpose is to facilitate

the flow of information between all business functions inside the boundaries of the

organization and manage the connections to outside stakeholders. Built on a centralized

database and normally utilizing a common computing platform, ERP systems consolidate all

business operations into a uniform and enterprise wide system environment.

An ERP system can either reside on a centralized server or be distributed across modular

hardware and software units that provide "services" and communicate on a local areanetwork. The distributed design allows a business to assemble modules from different

vendors without the need for the placement of multiple copies of complex and expensive

computer systems in areas which will not use their full capacity.

The Advantages and Disadvantages of ERP

There are a number of powerful advantages to Enterprise Resource Planning. It has been

used to solve a number of problems that have plagued large organizations in the past. At the

same time, it is not without a number of disadvantages. Being able to weigh the two will allow

a company to decide if this solution will properly meet their needs.

It should first be noted that companies that fail to utilize systems such as ERP may find

themselves using various software packages that may not function well with each other. In

the long run, this could make the company less efficient than it should be.

There are a number of processes that a company may need to integrate together. One of

these processes is called design engineering. When a company is in the process of

designing a product, the process of actually creating it is just as important as the end result.

ERP can be useful in helping a company find the best design process. Another area where


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ERP can be useful is order tracking. When a company receives orders for a product, being

able to properly track the orders can allow the company to get detailed information on their

customers and marketing strategies. If different software packages are being used, this data

may not be consistent.

Perhaps one of the most important advantages of ERP is its accounting applications. It can

integrate the cost, profit, and revenue information of sales that are made, and it can be

presented in a granular way. Enterprise Resource Planning can also be responsible for

altering how a product is manufactured. A dating structure can be set up which can allow the

company to be informed of when their product should be updated. This is important, because

it will allow the company to keep better track of their products, and it can allow the products

themselves to be produced with a higher level of quality. Another area where ERP can be an

indispensable tool is the area of security. It can protect a company against crimes such as

embezzlement or industrial espionage.

However, with all the advantages that ERP offers, there are a number of disadvantages as

well. Perhaps one of the biggest disadvantages to this technology is the cost. At this time,

only large corporations can truly take advantage of the benefits that are offered by this

technology. This leaves most small and medium sized businesses in the dark. A number of

studies have shown that the biggest challenges companies will face when trying to

implement ERP deals with investment. The employees must be continually trained on how to

use it, and it is also important for companies to make sure the integrity of the data is

protected.

ERP has a number of limitations. The success of the system is fully dependent on how the

workers utilize it. This means they must be properly trained, and a number of companies

have attempted to save money by reducing the cost of training. Even if a company has

enough money to implement ERP, they may not be able to successfully use it if they do not

have enough money to train their workers on the process of using it. One of the biggest

problems with ERP is that it is hard to customize. Very few companies can effectively use


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ERP right out of the box. It must be modified to suit their needs, and this process can be both

expensive and tedious. Even when a company does begin changing the system, they are

limited in what they can do.

How can ERP improve a companys business performance?

ERPs best hope for demonstrating value is as a sort of battering ram for improving the way

your company takes a customer order and processes it into an invoice and revenue

otherwise known as the order fulfillment process. That is why ERP is often referred to as

back-office software. It doesnt handle the up-front selling process (although most ERP

vendors have developed CRM software or acquired pure-play CRM providers that can do

this); rather, ERP takes a customer order and provides a software road map for automatingthe different steps along the path to fulfilling it. When a customer service representative

enters a customer order into an ERP system, he has all the information necessary to

complete the order (the customers credit rating and order history from the finance module,

the companys inventory levels from the warehouse module and the shipping docks trucking

schedule from the logistics module, for example).

People in these different departments all see the same information and can update it. When

one department finishes with the order it is automatically routed via the ERP system to the

next department. To find out where the order is at any point, you need only log in to the ERP

system and track it down. With luck, the order process moves like a bolt of lightning through

the organization, and customers get their orders faster and with fewer errors than before.

ERP can apply that same magic to the other major business processes, such as employee

benefits or financial reporting.


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6.1 Software at REC

There are following software that are used by REC for its day to day activities.

These are:-

y Netscape navigator( ERP System )

y Mozila firefox ( Loan Accounting system )

y Tally etc.

Netscape navigator:-

Netscape Navigator and Netscape are the names for the proprietary web browser popular in

the 1990s. It was the flagship product of the Netscape Communications Corporation and the

dominant web browser in terms of usage share, although by 2002 its usage had almost

disappeared. The Netscape Navigator web browser was succeeded by the Netscapte

Communicator Internet suite, in turn succeeded by Netscape 6, Netscape 7, Netscape 8,

Netscape Browser 8, and Netscape Browser 9.

There are different type of category available under which we can work. We choose a

category in it namely For issue of release advice to borrowers.

The meaning of this category is to provide the information of the borrower to the department.

For access to this option we need a user name or password. After putting the user name and

password in the system, it verifies from the main server after that we can access it. Like:


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6.2 Reports Generated from ERP

1 LNS: Adjust Converted Receivable

2 LNS: Fee Assessment

3 LNS: GL Transfer

4 LNS: Loan Agreement Report

5 LNS: Loans Portfolio Report

6 LNS: Loans Reconciliation Report

7 LNS: Reverse Last Bill

8 LNS: Update Funding Status

9 Payables Open Interface Import

10 Supplier Payment History

11 REC AP LNS Payee Wise Disbursement

12 REC AP Loans Paid Invoices

13 REC AP Loans Unpaid Invoices14 REC Claim Status - Under Process

15 REC Claim Under Process Details

16 REC Claim Status Under Process - Aging

17 REC LNS Abstract of Disbursement

18 REC LNS Accrued Interest Report

19 REC LNS Accrued Interest Summary Report

20 REC LNS Attach ERS Loan

21 REC LNS Attach Payee to Loan

22 REC LNS Charge Delay & Penal Interest

23 REC LNS Create Rebate Invoices24 REC LNS Disbursement Details Category Wise

25 REC LNS Disbursement Details Customer Wise

26 REC LNS Import Loans from Projects

27 REC LNS Interest Account Report

28 REC LNS Interest Demand Notice Report

29 REC LNS Interest Income Report

30 REC LNS Loan Account Ledger Detail Report

31 REC LNS Loan Account Ledger Report

32 REC LNS Loan Disbursed, Repaid and Balance Report

33 REC LNS Loan Wise Disbursement Report

34 REC LNS Loan Wise Outstanding Balance Report

35 REC LNS Non-Starter Report

36 REC LNS Outstanding Balance Details Category Wise

37 REC LNS Outstanding Balance Details Customer Wise

38 REC LNS Principal Demand Notice Report

39 REC LNS Projects-Loans Security Info Report


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40 REC LNS Release Advice Report to Borrower

41 REC LNS Scheme Ledger Report

42 REC LNS Scheme Wise Outstanding Balance Report

43 REC LNS Subsidy Report

44 REC LNS Sync Pre Approval Process

45 REC LNS Synchronize Loans With Projects

46 REC LNS Synchronize Master Loan Amount with Project Amount

47 REC LNS Synchronize Master Loan Moratorium with Project

48 REC LNS Synchronize Master Loan Rate Flags with Project

49 REC LNS Synchronize Master Loan Term with Project Term

50 REC LNS Synchronize Master Prin Frq with Project

51 REC LNS Synchronize Reset Period with Project

52 REC LNS Upload Interest Circular

53 REC LNS Weighted Average Cost of Funding Disbursement Wise

54 REC LNS Weighted Average Cost of Funding Outstanding Balance Wise55 REC LNS: Claim Approved and pending for payment

56 REC LNS:: Loans Disbursements Details (Category Wise)

57 REC LNS:: State into customer wise total loan disbursements Details

58 REC Loan Reset problem case

59 REC Loans Disbursement Under Various Categories


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6.3 Method of working at ERP

For go to the username page we click on the Application Log on Links. After that we get:

After logging in the system, we go to the following path:

Loan agent => Loan dashboard


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Click on Submit request. That is available at the right side of the window.


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Then after we choose a category like


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REC LNS Release Advice Report to borrower

Click on the NEXT button

This page contains following options like date, borrower name etc. In date we have to put the

date and in borrowers column we have to put the party name.

The page will be displays as follows:-


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Click on the next button, for moving to the next page.

This page contains information about the schedule. In which we have to put manyinformation like star date, end date etc. Software automatically fills this information but if any

correction required by the user then we can modify it according to our need and requirement.

The page is as follows:-


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For moving to the next step, we click on the next button. The page contains information about

the layout like type of output we want to take. Choose the one type of report among the

available option. It includes Excel file, PDF file, FO, RTF, HTML etc.


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Now we will click on the next button, for moving to the next page.

This page contains information about notifications. Now we will click on the next, for moving

to the next page.

This page contains information about printing the page. According to our requirement we will

fill this requirement.

The page will displays as follows:-


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Now we will click on the next page.

This is review page shows the information before printing. Now after checking all the

information we click on submit. After clicking on the information will be submitted to the

system and it will give us output.

The output page is as follows contains output file.


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Click on the Refresh Link until and unless Output comes. It is our final output after doingthe some

minor formatting, if required we can use it.

This is the entire procedure of printing the REC LNS Release advice report to borrower.

Click on the dashboard button for this action:-


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for going to the next page we click on the link namely dashboard.

REC Application reports Demand Notice

REC issue demand notice for interest to the borrowers of the two types, namely

y Monthly Interest

y Quarterly Interest

Monthly Interest This is prepared at the end of the every month.

Quarterly Interest This is prepared at quarterly basis at the following dates

I 20th March to 19th June

II 20th June to 19th September

III 20th September to 19th December

IV 20th December to 19th March

For accrued Interest

20th March to 31th March

Every month dated 5 or 6 REC issue demand notice to the borrowers.

Rebate Prompt payment rebate

When a borrower pays interest on timely or before the due date REC gives a rebate to those

borrowers called prompt payment rebate.

To get the notice of the interest of the customer, then type


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Update funding status

Supplier payment history

For this we have to fill the following information

Supplier type -

Date -

Status -

Borrower Name

Yes


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7. Date Analysis

HIGH LIGHTS (Q2 & H1 FY11 VS. Q2 &H1 FY10)

Total Assets (net of current liabilities & incl. DTA) increased by 21 75% from Rs 59 724

Crores to Rs 72 714 Crores.

Balance Sheet 21.75% Rs. 59,724 Rs. 72,714 Crores.

Outstanding Borrowings increased by 17.10% from Rs. 51,602 Crores to Rs. 60,428 Crores

Net worth increased from 8,121 Crores to 12,286 Crores.

Income

Operating Income in H1 increased by 28.93% from Rs. 3,045 Crores to Rs. 3,926 Crores.

NII increased by 33.33% from Rs. 1,167 Crores to Rs. 1,556 Statement Crores.

Profit before tax in H1 increased by 30.11% from Rs. 1,252 Crores to Rs. 1,629 Crores.

PAT increased by 24.74% from Rs. 966 Crores to Rs. 1,205 Crores.

Business

Disbursements increased by 11.72% from Rs. 9,122 Crores to Rs. 10,191 Crores.

Sanctions increased by 5.70% from Rs. 31,476 Crores to Rs. 33,270 Crores.


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Interpretation:

REC Interest income Q1 FY 11 income was Rs. 1877 v/s Rs. 1449 in Q1 FY 10.

REC Interest income Q2 FY 11 income was Rs. 1988 v/s Rs. 1533 in Q1 FY 10.

REC Interest income H1 FY 11 income was Rs. 3865 v/s Rs. 2982 in Q1 FY 10.

REC Interest income FY 09 income was Rs. 4665 v/s Rs. 3361 in FY 08.


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Mainly rural sector oriented.

NPAs of the company is expected to rise .

The weak financial health of SEBs remains an area of concern even as they undergo

the reform process.

9. Conclusion

Rural Electrification Corporation which has a Navratna Status is growing with the fast pace.

The company is performing well in its borrowing since it is able to maintain lowest cost of

borrowings and in turn disbursment is able to get good return since some part of is

subsidised by government.

REC maintains its accounting data in ERP. ERP is a software which uses for keeping and

storing the data. Through which company track its records in an easy way. It is very effective

software. All the work related to accounting is done fast by the use of the ERP system.

REC plays a vital role in the process of accelerated development of power infrastructure in

rural areas. The loans extended by REC to various SEBs/ Power Departments are generally

backed by the respective state government guarantees. As on March 31, 2006 (prov), the

total loan assets of REC registered a rise of almost 20% over previous year.

Disbursements during FY'06 were around Rs 8000 crore, showing a marginal y-o-y growth of

1.5% in FY'06. The disbursements were primarily towards T & D projects and short-term

loans.

Loan assets of REC mainly comprise loans extended to SEBs. Considering the weak credit

profile of SEBs, REC's assets are inherently of weak credit quality and are exposed to risk of

non-payment of dues. Majority of these loan assets are backed by respective state

government guarantees and are classified as 'standard' as per RBI guidelines despite being

overdue for over six months, till invocation of guarantee. However, REC for the purpose of


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income recognition, classifies accounts overdue for more than 180 days as NPAs. Credit risk

is, to an extent, addressed by credit enhancement measures such as, letter of credits escrow

mechanisms, state government guarantees etc. Under the recovery initiatives, REC settled

overdue to the tune of Rs 415 crore of Assam and Mizoram in FY'06 thus bringing down the

total overdue by over 100% compared to previous year.

10. Recommendations

There are a number of powerful advantages to Enterprise Resource Planning. It has been

used to solve a number of problems that have plagued large organizations in the past. At the

same time, it is not without a number of disadvantages. Being able to weigh the two will allow

a company to decide if this solution will properly meet their needs.

It should first be noted that companies that fail to utilize systems such as ERP may find

themselves using various software packages that may not function well with each other. In

the long run, this could make the company less efficient than it should be.

There are a number of processes that a company may need to integrate together. One of

these processes is called design engineering. When a company is in the process of

designing a product, the process of actually creating it is just as important as the end result.

ERP can be useful in helping a company find the best design process. Another area where

ERP can be useful is order tracking. When a company receives orders for a product, being

able to properly track the orders can allow the company to get detailed information on their

customers and marketing strategies. If different software packages are being used, this data

may not be consistent.

Perhaps one of the most important advantages of ERP is its accounting applications. It can

integrate the cost, profit, and revenue information of sales that are made, and it can be

presented in a granular way. Enterprise Resource Planning can also be responsible for

altering how a product is manufactured. A dating structure can be set up which can allow the

company to be informed of when their product should be updated. This is important, because


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it will allow the company to keep better track of their products, and it can allow the products

themselves to be produced with a higher level of quality. Another area where ERP can be an

indispensable tool is the area of security. It can protect a company against crimes such as

embezzlement or industrial espionage.

However, with all the advantages that ERP offers, there are a number of disadvantages as

well. Perhaps one of the biggest disadvantages to this technology is the cost. At this time,

only large corporations can truly take advantage of the benefits that are offered by this

technology. This leaves most small and medium sized businesses in the dark. A number of

studies have shown that the biggest challenges companies will face when trying to

implement ERP deals with investment. The employees must be continually trained on how to

use it, and it is also important for companies to make sure the integrity of the data is

protected.

ERP has a number of limitations. The success of the system is fully dependent on how the

workers utilize it. This means they must be properly trained, and a number of companies

have attempted to save money by reducing the cost of training. Even if a company has

enough money to implement ERP, they may not be able to successfully use it if they do not

have enough money to train their workers on the process of using it. One of the biggestproblems with ERP is that it is hard to customize. Very few companies can effectively use

ERP right out of the box. It must be modified to suit their needs, and this process can be both

expensive and tedious. Even when a company does begin changing the system, they are

limited in what they can do.


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11. Limitations of the Study

Limitations are the limiting lines that restrict the work in some way or other. In this research

study also there were some limiting factors. some of them are as under:

1. Data Collection

The most important constraint in this study was data collection as Secondary data was

selected for study. Secondary data means data that are already available.

2. Reliability

The data collected in research work was secondary data, So, this puts a question

mark on the reliability of this data, as data was collected from books and websites.

3. Accuracy

The facts and findings of the data cannot be accepted as accurate to some extent as

firstly, secondary data was collected. Secondly, for doing descriptive research time

needed to be more, because in short period you cannot cover each point accurately.

4. Analysis tools

Analysis tools were not available so it became really tough to interpret the ratios

accurately and minutely without a proper technique.


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Final project of REC

Documents