Rural Electrification Corporation

The Directors have pleasure in presenting the Thirty-Ninth Annual
 Report of your Company - Rural Electrification Corporation Ltd.  (REC)
 for the year ended 31st March, 2008 along with the Audited Statements
 of Accounts.
 
 This is the first Report to the shareholders after REC launched Initial
 Public Offer (IPO) of equity shares in February 2008.
 
 1.  PERFORMANCE HIGHLIGHTS
 
 1.1 Record breaking loan sanctions, disbursements, recoveries,
 operating income and profits Over the past decade your Company had
 sustainable growth in almost all key performance parameters and the
 performance for the year 2007-08 has been outstanding as highlighted
 below, breaking all previous records since inception:-
 
 Pramoter                                         2007-08 (Rs. in crore)
 
 Loans sanctioned                                         46770.00
 Disbursements                                            16304.00
 Recoveries                                                9042.00
 Operating income                                          3378.21
 Profit before tax                                         1312.42
 Profit after tax                                           860.15
 
 2006-07 (Rs.in crore)              Percentage increase
 
 28630.00                                  +63%
 13733.00                                  +19%
  6584.67                                  +37%
  2651.70                                  +27%
  1006.19                                  +30%
   660.26                                  +30%
 
 
 1.2 dividend
 
 After providing for tax and making necessary appropriation towards
 statutory reserves, your directors are happy to recommend payment of
 dividend @ 30% (Rs.3 per equity share of Rs.10 each) for the year
 2007-08.
 
 2.  LOANS SANCTIONED
 
 REC sanctioned loans worth Rs. 46770 crore during the year 2007-08, as
 against Rs. 28630 crore in the previous year excluding grants under
 RGGVY. The cumulative amount of sanctions made since inception upto
 31.3.2008 was Rs.179525.76 crore.
 
 3.  DISBURSEMENTS
 
 A total sum of Rs.16304 crore was disbursed during the year 2007-08 as
 against Rs.13733 crore in the previous year including grants under
 RGGVY. The cumulative amount disbursed since inception upto 31.3.2008
 was Rs.75243.31 crore.
 
 4.  RECOVERIES
 
 The amount due for recovery during the year 2007- 08 was Rs. 9002.73
 crore as compared to Rs. 6629.59 crore during the previous year. This
 figure included the dues from defaulting SEBs. The Company recovered a
 total sum of Rs. 9041.99 crore during the year 2007- 08. The details of
 overdues from defaulting borrowers as on 1.4.2007, the total dues
 receivable during the year 2007-08 and the recoveries made during the
 year 2007-08 are given below:-
 
 Particulars                                             (Rs.in crore)
 
 Overdues as on 01.04.2007                                 339.60
 Less : Manipur overdues rescheduled                        90.57
 Balance                                                   249.03
 Dues receivable during the year 2007-08                  9002.73
 Received during the year 2007-08                         9041.99
 Overdues as on 31.03.2008                                 209.77
 
 The Company has been taking effective steps for recovery of the same.
 
 5.  FINANCIAL REVIEW
 
 5.1 a summary of financial results
 
 The summary of financial results of the Company for the year ended 31st
 March, 2008 is given below:-
 
                                                         (Rs. in crore)
 Particulars                                  2007-08         2006-07
 
 Gross Income                                3537.66           2854.00
 Profit before tax                           1312.42           1006.19
 Depreciation                                   1.38              1.13
 Provision for Income Tax,                    452.27            345.93
 Deferred Tax & FBT
 Net Profit/Profit after Tax                  860.14            660.26
 Transfer to Special Reserve                  255.00            345.00
 Transfer to Reserve for Bad &                 58.00             34.00
 Doubtful Debts
 Transfer to General Reserve                  140.00             72.00
 Proposed Dividend                            257.59            177.00
 Dividend Tax                                  43.78             30.08
 Balance carried forward                      105.77              2.18
 
 5.2 initial Public Offer (iPO) of shares
 
 In February 2008 the Company made an Initial Public Offer (IPO) of
 15,61,20,000 equity shares of Rs. 10 each through 100% book-building
 process with price band of Rs.90 to 105 per share. The Issue was priced
 at Rs. 105 per share. The Issue comprised of a fresh issue of up to
 7,80,60,000 equity shares and an Offer for Sale of up to 7,80,60,000
 equity shares by the President of India acting through Ministry of
 Power, Government of India. 
 
 The Issue got a phenomenal response and it was oversubscribed by about
 27 times. The Qualified Institutional Buyers (QIB) portion got
 subscribed 39.31 times, the Non-Institutional portion 21.88 times, the
 Retail portion 7.52 times and the Employee Reservation portion 0.9
 times. The total number of applications received was 7,53,768. The
 Issue was priced at Rs. 105 per share including a premium of Rs. 95 per
 share. The fresh equity shares were allotted on 5th March 2008 and the
 total amount raised by the Company through IPO was Rs. 819.63 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
 Prospectus. The equity shares of the Company were listed on the
 National Stock Exchange and Bombay Stock Exchange on 12th March 2008,
 and requisite Listing Fees have been paid to each of these Stock
 Exchanges.
 
 In the Post-IPO scenario, the shareholding of the Government of India
 has reduced from 100% to 81.82% and the balance 18.18% is held by
 others.
 
 5.3 Paid-up-share capital
 
 The Issued and Paid up Share Capital increased from Rs. 780.60 crore to
 Rs. 858.66 crore as on 31.03.2008 after IPO, against the Authorized
 Capital of Rs.1200 crores, and an amount of Rs. 719.81 crore (net of
 Issue expenses of Rs. 21.76 crore) has been taken to Security Premium
 Account.
 
 5.4 Resource Mobilization
 
 The Company mobilized Rs. 8377.23 crore from the market during the year
 2007-08. This includes Rs. 2228 crore by way of syndicated loans from
 commercial banks, Rs. 3402.74 crore by way of Capital Gain Tax
 Exemption Bonds and Rs. 2568.30 crore by way of Non-priority Sector
 Bonds and Rs. 178.19 crore by way of Official Development Assistance
 (ODA) loan from Kreditanstat fur Wiederaufbau (KfW)/ Japan Bank for
 International Cooperation (JBIC). The domestic debt instruments of REC
 continued to enjoy ‘AAA’ rating i.e. the highest rating assigned by
 CRISIL, CARE, FITCH and ICRA - Credit Rating Agencies.
 
 5.5 external commercial Borrowings
 
 The Company has entered into an ODA loan agreement with the KfW,
 Germany in the financial year 2006-07 for Euro 70 million at a fixed
 rate of 3.73% for the purpose of conversion of LT lines to High Voltage
 Distribution lines Project to be implemented by State Discoms.  Tenor
 of the loan is 12 years including grace period of 3 years. Euro
 7,585,496.76 has been drawn till 31.3.2008 against this facility.
 
 The Company has also entered into an ODA loan agreement with JBIC,
 Japan in the financial year 2006-07 for JPY 20.63 billion at a fixed
 rate of 0.75% per annum to improve the sub-transmission system, to
 reduce T&D losses and to expand the access to electricity for
 un-electrified household and other rural loads. Tenor of the loan is 15
 years with moratorium of 5 years. JPY 3,251,751,977.77 has been drawn
 till 31.3.2008 against this facility.
 
 5.6 sovereign rating
 
 REC enjoys international credit rating equivalent to sovereign rating
 of India from International Credit Rating Agencies such as Moody’s and
 FITCH (which are “Baa3” and “BBB-” respectively).
 
 5.7 Maintaining low 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 cost of funds was 7.65%
 during the year 2007-08. As a result REC is able to deliver debt
 financing at competitive rates.
 
 5.8 Redemption and Pre-Payment
 
 During the year, the Company repaid a sum of Rs. 18.56 crore to the
 Government of India. It also redeemed a total sum of Rs. 655 crore owed
 to non- priority/ priority sector bond holders. In addition, Rs.2635.09
 crore worth of Capital Gain Tax Exemption Bonds and Rs. 202.97 crore of
 Infrastructure Bonds were also redeemed. The company also redeemed long
 term and short term loans from Banks of Rs.462 crore.
 
 5.9 Particulars regarding conservation of foreign exchange earnings &
 Outgo The particulars regarding foreign exchange outgo during the year
 under review are given in Schedule 17 point 16 to the Notes to the
 Accounts forming part of the Annual Accounts.
 
 No foreign exchange was earned during the year under review.
 
 5.10 financial status at the close of the year
 
 At the close of the financial year 2007-08, the total resources of the
 Company stood at Rs. 40467.57 crore.  Out of this sum, Equity Share
 Capital contributed Rs.858.66 crore, Reserves and Surplus stood at
 Rs.4509.04 crore, Loans from LIC, Commercial Banks and Market
 Borrowings accounted for Rs.34282.79 crore and deferred tax provision
 of Rs.817.08 crore.  These funds were deployed as Long / Short term
 Loans of Rs.39316.51 crore and Fixed Assets of Rs.77.90 crore,
 Investments of Rs.1147.39 crore and balance (of Rs.74.23 crore) in Net
 Current Assets.
 
 6.  DIRECTORS’ RESPONSIBILITY STATEMENT
 
 In pursuance of Section 217 (2AA) of the Companies Act, 1956, your
 Directors certify
 
 (i) That the applicable accounting standards had been followed in the
 preparation of the annual accounts, along with proper explanation
 relating to material departures;
 
 (ii) That the directors had selected such accounting policies and
 applied them consistently and made judgments and estimates 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 or loss of the company for that period;
 
 (iii) That the directors had taken proper and sufficient care to
 maintain adequate accounting records as per the provisions of the
 Companies Act for safeguarding the assets of the company and for
 preventing and detecting fraud and other irregularities;
 
 (iv) That the directors had prepared the annual accounts 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 2007-08, the Company sanctioned 26 nos. of new
 generation / R&M loans and 4 no.  additional loan assistance with total
 financial outlay of Rs.27274.66 crore, including consortium financing
 with other financial institutions. Since 2002-03 and upto 31.3.2008,
 REC has sanctioned financial assistance of Rs.58001 crore for R&M,
 thermal and hydro generation projects. REC has disbursed Rs.4308 crore
 during 2007- 08 against the on-going generation projects.
 
 The sector wise break up of loans sanctioned including additional loan
 assistance is as below :-
 
                                                       loan amount
                                     no. of loans
                                                      (Rs. in crore)
 
 STATE SECTOR
 Fresh Loan                              16
                                                       21845.66
 Additional Loan                          1
 PRIVATE SECTOR
 Fresh Loan                              10
                                                        5429.00
 Additional loan                          3
 Total                              26+4=30            27274.66
 
 During the current financial year 2008-09 (upto 30.6.2008), the Company
 has sanctioned loan assistance to four projects amounting to Rs.6560
 crore and has disbursed approx. Rs.978 crore against the on- going
 generation projects.
 
 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
 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 2007-08, REC has sanctioned loans of Rs.15033.19 crore
 for 494 transmission and distribution projects and disbursed Rs.7063
 crore as compared to Rs.4784 crore in the previous year 2006-07, an
 increase of 48%.
 
 During current financial year 2008-09 (upto 30.6.2008) the Company has
 sanctioned Rs.5182.52 crore and disbursed Rs.1168.55 crore for T&D
 projects.
 
 7.3 system improvement:
 
 To strengthen and improve the Transmission, Sub- transmission and
 Distribution System in the country and to reduce the T&D losses, REC
 provides loan assistance to the Power utilities under its System
 Improvement portfolio. In keeping with the tradition, thrust on
 financing of such schemes for improvement of power transmission and
 distribution network for reducing T&D losses and improving the quality
 of power supply was continued during the year also.
 
 7.4 Bulk loan financing:
 
 Apart from System Improvement projects, REC is also financing the
 procurement and installation/ replacement of various equipment required
 in the system. For example, most of the power utilities are taking up
 large scale installation/replacement of meters to meet the target of
 100% metering set by the Govt. in order to have an accurate measure of
 the energy flow in the system, for which REC provides finance to meet
 their requirements. Similarly, to meet the ever increasing requirement
 of financial support for installation and replacement of transformers,
 capacitors, poles, conductors etc. REC has continued the financing of
 schemes for bulk procurement of these items.
 
 7.5 system improvement & Bulk loan
 
 During the year 2007-08, a total of 363 system improvement schemes and
 bulk loan schemes were sanctioned involving a loan outlay of
 Rs.14131.67 crore. This included: (i) counterpart funding under
 Accelerated Power Development & Reforms Programme (APDRP) of Ministry
 of Power for involving loan outlay of Rs. 180.55 crore, (ii) 27 schemes
 involving a loan assistance of Rs. 921.53 crore for financing
 investment in the distribution system by way of installation of
 essential equipment like transformers, capacitors and meters, (iii) 64
 schemes involving a loan assistance of Rs.1668.20 crore for conversion
 of Low Voltage Distribution to High Voltage Distribution System (HVDS),
 and (iv) 135 schemes for Rs.7584.83 crore for improving the
 transmission network.
 
 7.6 Pumpset energization:
 
 REC’s loan portfolio also includes extension of loan assistance for
 energization of agricultural pumpsets. Out of the total of around
 154.71 lakh pumpsets reported to be energized in the country upto
 31.3.2008, about 57% pumpsets have been energized under schemes funded
 by REC.
 
 During the year 2007-08, 181244 electric irrigation pumpsets were
 reported energized under REC financed schemes. 89 nos. new schemes for
 a loan assistance of Rs.618.59 crore were sanctioned during the year
 under this category.
 
 7.7 activities in north eastern (ne) states
 
 A loan assistance of Rs. 41.27 crore was disbursed to the NE states
 under T&D programme during the year 2007- 08 as compared to Rs.16.21
 crore during the previous year. 11 schemes for a loan assistance of
 Rs.38.42 crore were sanctioned to Nagaland during 2007-08 under System
 Improvement category.
 
 8.  ELECTRIFICATION OF VILLAGES
 
 8.1 Rajiv gandhi grameen Vidyutikaran Yojana (RGGVY)
 
 Government of India, in April 2005, launched the scheme “Rajiv Gandhi
 Grameen Vidyutikaran Yojana (RGGVY)– Scheme of Rural Electricity
 Infrastructure and Household Electrifcation”, vide OM No. 44/19/2004
 D(RE), dated 18th March 2005, for the attainment of the National Common
 Minimum Programme (NCMP) goal of providing access to electricity to all
 households in five years. The scheme is being implemented through REC.
 Under the scheme ninety per cent capital subsidy is being provided by
 Govt. of India for overall cost of the projects. This approval was for
 implementation of Phase I of the scheme for capital subsidy of Rs.5000
 crore during the 10th Plan period.
 
 235 projects covering 178948 villages (67012 un- electrifed and 111936
 electrified villages) with the total sanctioned project cost of Rs.
 9696 crore were sanctioned for implementation by the Ministry of Power
 in X Plan period.
 
 Further sanction 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 by 2009 has
 been conveyed vide OM No. 44/37/07-D(RE) dated 6th Feb. 2008 issued by
 Ministry of Power.
 
 316 projects covering 282164 villages (47658 un- electrifed and 234506
 electrified villages) with the total sanctioned project cost of Rs.
 15553.22 crore have been sanctioned for implementation in XI Plan
 period by the Ministry of Power during 2007-08.
 
 Under the scheme, it has been reported that works have been completed
 for 38,262 villages (including 9301 un-electrified and 28961
 electrified villages) and connections to 20.41 Lakh rural households
 including 16.21 Lakh BPL households have been provided during 2007-08.
 
 Cumulatively, works in 88,664 villages (47826 un- electrifed and 40838
 electrified villages) have been completed and connections to 27.71 Lakh
 rural households including 22.93 Lakh BPL households have been released
 under the scheme up to 31.03.2008.
 
 8.2 decentralized distributed generation (ddg)
 
 RGGVY provides for DDG from conventional or renewable
 (non-conventional) sources such as biomass, bio gas, mini hydro, and
 solar etc. for villages where grid connectivity is either not feasible
 or not cost effective.
 
 DDG systems are small power generation units with local distribution
 system.
 
 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 institution.
 
 A provision of Rs 540 Crore has been kept as subsidy for DDG projects
 under XIth Plan.
 
 The Guidelines for DDG projects under RGGVY are under finalization. DDG
 projects under RGGVY will be taken up after finalization of these
 Guidelines.
 
 8.2.1 details of Renewable Projects handled by ddg group So far REC has
 financed various Renewable Projects as per details given below as on
 31.03.08 :
 
 Projects Under implementation and Projects
 commissioned
 
 sl.        description        Projects
 no.        under
            implem-
            entation
 
 (i)        Value of Loan       365.21
            sanctioned
           (Rs. Crore)
 (ii)       Disbursement        188.75
            made so far
           (Rs Crore)
 (iii)      Value of Projects    633.85
            Sanctioned
           (Rs Crore)
 (iv)       MW of Projects        104.7
 
 Projects       TOTAL
 commi-
 ssioned
 
  80.73        445.94
  78.34        267.09
 180.11        813.96
  36.60        145.30
 
 9.  INTERNATIONAL COOPERATION & DEVELOPMENT
 
 9.1 Japan Bank for international cooperation (JBIC)
 
 (i) REC had entered into a loan agreement with JBIC on 31.3.2006 for a
 loan assistance of 20.629 billion Japanese Yen (approx. Rs.784 crore
 with an exchange rate of 100 Yen = Rs.38.01 – As on 31.3.2006) under
 the Official Development Assistance (ODA) loan package for the Rural
 Electricity Distribution Backbone (REDB) Project of REC. The project is
 being implemented in the states of Andhra Pradesh, Maharashtra and
 Madhya Pradesh. The Drawal of funds from JBIC in respect of this loan
 has commenced during the financial year 2007-08. An amount of Rs 140.03
 crore (approx.) has been disbursed to the sub-borrowers and an amount
 Rs 124.91 crore (approx.) equivalent loan amount has been drawn from
 JBIC in the financial year 2007-08.  Out of 749 nos 33/11 kv new
 substations and 510 augmentation of substations envisaged under the
 project, a total number of 113 substations and 97 augmentation of
 substations have been completed in the financial year 2007-08.
 
 (ii) REC entered into a second loan agreement with JBIC on 10.03.08 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 10.3.2008) for
 implementation of transmission system project in the state of Haryana
 for strengthening intra-state transmission systems in the state. The
 drawal of funds from JBIC in respect of this loan is expected to
 commence in the financial year 2008-09.
 
 9.2 indo-german Bilateral cooperation Programme
 
 (i) REC entered into a loan agreement with KfW on 8.8.2006 for ODA loan
 of 70 Million Euro (approx.  Rs.418 crore with an exchange rate of 1
 Euro = Rs.59.74 – 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 drawal of funds from KfW in respect of this loan has
 commenced during the financial year 2007-08. An amount of Rs 78.91
 crore (approx.) has been disbursed to the sub-borrowers and equivalent
 amount has been drawn from KfW in the financial year 2007-08. The
 Project is being implemented as per schedule. Further, the
 implementation of various Technical Assistance (TA) grant component as
 per the Financing Agreement of KfW Energy Efficiency Programme-I and
 drawal of funds from KfW has commenced during the financial year
 2007-08.
 
 (ii) KfW has committed a 2nd line of credit for 70 million Euro to REC
 under their Energy Efficiency Programme –II. A HVDS Project proposal of
 Uttar Haryana Bijli Vitaran Nigam (UHBVN) has been proposed by REC for
 consideration of loan under the programme and the project has been
 appraised by KfW Mission. The loan agreement in this regard is expected
 to be signed in the current financial year 2008-09, after pledge of
 loan by Government of Germany.
 
 10.  STANDARDISATION & QUALITY CONTROL
 
 REC has continually provided technical expertise in distribution
 systems to State Power Utilities. The technical specifications and
 standards issued by REC are used extensively by all State Power
 Utilities. REC, in order to promote new technologies, has been
 continuously looking for innovations using latest R&D in the field of
 power distribution. REC has recently issued / updated technical
 specifications on single phase distribution transformers, battery and
 battery charger, internal wiring and Vacuum Circuit Breaker (VCB).
 
 In order to ensure proper quality in implementation of RGGVY, 3 tier
 Quality Control Manual has been prepared & finalised.
 
 11.  ERP BASED INTEGRATED INFORMATION SYSTEM
 
 REC has initiated implementation of Company-wide ERP system to increase
 the efficiency and effectiveness of the functional processes across the
 Company.  The objective is to create a robust MIS system for all
 functions with seamless flow of data from various offices of the
 Company and to provide management support at all levels. The
 implementation of Company- wide ERP system has reached advanced stage
 during the year.
 
 12.  CENTRAL INSTITUTE FOR RURAL ELECTRIFICATION (CIRE)
 
 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 organizations concerned with Power and Energy. CIRE is
 located in the Institutional area near Acharya NG Ranga Agricultural
 University on the way to Rajiv Gandhi International Airport, on
 National Highway No.7 leading to Bangalore. The Institute Campus is
 spread over about 14 acres with Administration, Teaching, Library and
 Hostel blocks.
 
 CIRE conducts regular programs on various aspects of Transmission and
 Distribution of Power Sector; besides it conducts sponsored programs
 like Drum Reforms Upgrades and Management (DRUM) and also custom made
 programs on request from the power companies.  The Institute is
 empanelled by the Ministry of External Affairs to conduct international
 programs to the officers of the power sector in Afro-Asian countries,
 under Indian Technical Economic Cooperation (ITEC) and Special
 Commonwealth Africa Assistance Plan (SCAAP).  It collaborates with
 other management training institutions / agencies to conduct
 specialized programs and also seminar and workshops on topical areas.
 
 The Institute, as on 31st March 2008, has organized 785 training
 programmes and 16,213 officers from State Electricity Boards, Power
 Distribution Companies, Electricity Departments, Rural Electric
 Cooperatives, Banks, Regulatory Commissions, Power Utilities, Power
 Companies, and Rural Development Agencies etc.  participated in various
 programmes.
 
 13.  REC IS AN NBFC
 
 The Company was registered with Reserve Bank of India (RBI) as a
 Non-Banking Finance Company (NBFC) during the year 1997-98. As per
 Notification No. DNBS(PD), CC No. 12/D2.01/99/2000 dated 13- 1-2000 of
 RBI, Government Companies conforming to Section 617 of the Companies
 Act, 1956, have been exempted from applicability of the provisions of
 RBI Act relating to maintenance of liquid assets and creation of
 Reserve Funds and the Directions relating to acceptance of public
 deposits and prudential norms.  The said Notification is also
 applicable to REC, being a Government Company under Section 617 of the
 Companies Act, 1956.
 
 14.  PRUDENTIAL NORMS
 
 The Board of Directors of REC in its meeting held on 13th December 2006
 approved a set of Prudential Norms to be followed by the Company. The
 Norms for concentration of credit / investment as stated in the
 Prudential Norms were made effective from 13th December 2006 itself.
 The other Prudential Norms were made effective from 1st April 2007.
 Accordingly, for the year 2007-08, REC has prepared its accounts
 applying these Prudential Norms. Salient features of these Norms are
 given in the Significant Accounting Policies attached to the Statement
 of Accounts. As per the Prudential Norms, provisioning is required to
 be made even in respect of assets guaranteed by State Government. The
 impact of such change for provisioning in respect of State Government
 guaranteed loans, in the audited Statement of Accounts for the year
 2007- 08, is to the extent of Rs.3999.39 Lakh.
 
 15.  RISK MANAGEMENT
 
 15.1 asset liability Management
 
 The Company has a Risk Management Policy which covers inter alia Asset
 Liability Management, Derivatives and Investment of Surplus Funds. An
 Asset Liability Management Committee (ALCO) is currently functioning
 under the leadership of CMD with reporting responsibility to the Board.
 ALCO also comprises of Director (Finance), Director (Technical) and the
 General Managers in Finance, Generation and T&D Divisions.
 
 Asset Liability Management Committee (ALCO) monitors risk related to
 liquidity, interest rates and currency rates. The liquidity risk is
 being monitored with the help of liquidity gap analysis Based on the
 cash liquidity gap analysis, the Committee managed 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 also managed through interest rate sensitivity
 analysis.
 
 15.2 foreign currency Risk Management
 
 The Company has put in place a derivative policy to manage risk
 associated with the Foreign currency borrowings. The company enters in
 to derivative transactions to cover exchange rate and interest rate
 risk through various instruments. During the year the Company has fully
 hedged (principal plus coupon) its JPY loan of equivalent USD 200
 million at a fixed rate of 6.50% p.a payable semi annually. As on 31st
 March, 2008 the total Foreign currency liabilities outstanding are
 26822 million in JPY and 7.59 million in Euro out of which the JPY
 loans are fully hedged as on date.
 
 16.  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 nine major
 Project Offices across the country. This was Certified by BSI
 Management Systems under accreditation by UKAS (United Kingdom
 Accreditation Service) Quality Management, UK.  The Quality Policy of
 the Corporation demonstrates the Management’s commitments for the
 continual improvement in customer satisfaction and in quality work
 culture.
 
 17.  FAIR PRACTICES CODE
 
 In pursuance of Notification dated 28th September, 2006 issued by the
 Reserve Bank of India directing all NBFCs to frame Fair Practices Code,
 the Board of Directors of REC approved in March 2007 the Fair Practices
 Code which also includes Grievances Redressal Mechanism. The Code aims
 at putting in place Fair Lending Practices of the Company in a
 transparent manner, covering in detail matters relating to the
 processing of loan applications for Generation, Transmission and
 Distribution Projects, loan appraisal and its sanction, terms and
 conditions of disbursement of loans, post disbursement supervision etc.
 At the Board Meeting held on 26th May 2008, the coverage of the Code
 has been extended to processing of loan applications for Short Term
 Loan also. As directed by the Board, half-yearly Status reports on
 compliance with Fair Practices Code and Grievances Redressal Mechanism
 are to be submitted to the Board for periodic review.
 
 18.  POLICY FOR PREVENTION OF FRAUD
 
 In order to facilitate the development of controls which will aid in
 the detection and prevention of fraud in or against REC, a policy for
 prevention of frauds in REC has been framed with the approval of the
 Board of Directors. The said Policy provides a system for detection and
 prevention of fraud, reporting of any fraud that is detected or
 suspected and fair dealing of matters pertaining to fraud.
 
 19.  CODE OF CONDUCT FOR BOARD MEMBERS AND SENIOR MANAGEMENT
 
 As required under the Listing Agreement executed with Stock Exchanges,
 the Board of Directors of REC at its meeting held on 10th July 2007 has
 approved a Code of Conduct for Board Members and Senior Management of
 the Company. The Code of Conduct has been posted on the Website of the
 Company. The Board Members and Senior Management personnel have
 affirmed compliance with the Code as applicable to them for the period
 upto March, 2008.
 
 20.  CODE FOR PREVENTION OF INSIDER TRADING IN REC EQUITY SHARES /
 SECURITIES
 
 In terms of Securities and Exchange Board of India (Insider Trading)
 Regulations, 1992, the Company has formulated a comprehensive Code for
 Prevention of Insider Trading to preserve the confidentiality and to
 prevent misuse of un-published price sensitive information. Every
 Director, officer and designated employee of the Company has a duty to
 safeguard the confidentiality of all such Information obtained in the
 course of his or her work at the Company and not to misuse his or her
 work at the Company and not to misuse his or her position or
 information regarding the Company to gain personal benefit or to
 provide benefit to any third party. The Code lays down guidelines and
 procedures to be followed and disclosures to be made while dealing with
 the shares of the Company and the consequences of non- compliance. The
 Company Secretary has been appointed as Compliance Officer and is
 responsible for adherence to ‘Code for prevention of Insider Trading’.
 A Copy of the Code has been posted on the Company’s website.
 
 In line with the requirement of the said Code, trading window was
 closed whenever some price sensitive information was submitted to the
 Board. Notice of closure of Trading Window was issued to all employees
 well in advance and proper announcements were also made, restraining
 all the employees not to deal in the shares of the Company when the
 window is closed.
 
 21.  HUMAN RESOURCES MANAGEMENT
 
 In the context of growing business and challenges of the organization,
 Human Resource Management has acquired considerable significance. A
 great deal of emphasis is being placed on acquisition, retention and
 development of quality Human Resources to enable the organization to
 achieve its business objectives. The task of inducting professionally
 qualified personnel across the hierarchy continued during the year
 under review, thereby strengthening the cadre of managers across the
 hierarchy. As on 31st March 2008, the total inventory of human
 resources stood at 699 which included 364 executives and 335
 non-executives.  During the year 28 executives were appointed across
 hierarchy through open advertisement. Additionally 5 executives were
 inducted through a process of campus recruitment which is now
 introduced as a means to infuse young professionals in the
 organization.
 
 21.1 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 31-03-2008 are given below :
 
 group             total no. of             sc                st
 employees
 
 A                   294(284)            28(27)            6(6)
 B                   183(187)            22(23)            4(6)
 C                   115(116)            20(21)            1(1)
 D                   107(111)            33(34)            5(5)
 
 Grand Total:        699(698)          103(105)          16(18)
 
 21.2 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 280 employees to various training programmes, workshop etc.
 within the country and abroad. In addition, 14 training programmes were
 conducted in-house, which were attended by 293 employees including 5
 programmes conducted at CIRE, Hyderabad exclusively for REC employees.
 Taken together, these initiatives enabled the Company to significantly
 out-perform MOU targets (as against 360 man days we achieved a figure
 of 1709 for the year). In order to enable them develop global exposure,
 several officers were sent to attend various programmes abroad to
 various countries which included Japan, Singapore, France, Switzerland,
 Belgium, Netherlands etc.
 
 21.3 staff Welfare
 
 The Company undertook several steps in the area of Staff Welfare during
 the year. These included expansion of list of empanelled hospitals for
 improved and decentralized health care delivery, as also raising the
 benchmark for medical expenses at par with Sir Ganga Ram Hospital.
 
 21.4 Women cell
 
 A Women Cell is in operation for looking after the issues concerning
 women employees. In addition to that, a Complaints Committee on Gender
 Harassment and Justice is also in operation in REC, which includes a
 representative of NGO as per the guidelines of the Hon’ble Supreme
 Court of India.
 
 21.5 industrial Relations:
 
 Corporation maintained healthy, cordial and harmonious relations at all
 levels. The role of REC Employees’ Union and REC Offcers’ Association
 has been laudable in maintenance of harmonious relations. Motivated
 employees worked in team spirit and collectively enabled the
 organization outperform its business goals by a significant margin
 during the year.
 
 21.6 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 Grievances also.
 
 22 PARTICULARS OF EMPLOYEES UNDER SECTION 217(2A) OF THE COMPANIES ACT,
 1956
 
 There was no person employed for the whole and / or part of the year in
 the Corporation drawing remuneration exceeding Rs.24,00,000/- per annum
 or Rs.2,00,000/- per month, for the purpose of Section 217(2A) of the
 Companies Act, 1956.
 
 23.  VIGILANCE ACTIVITIES
 
 Vigilance Wing of the company headed by Chief Vigilance Officer, has
 played its role in maintaining integrity in the organization apart from
 inculcating habits of adherence to systems and procedures amongst the
 employees. The Vigilance Division pursued framing of policies/ proper
 guidelines for conducting business in a proper manner/systematically.
 It has also ensured that CVC’s instructions were strictly implemented
 by the company.
 
 The company continued to accord a major thrust on preventive vigilance,
 streamlining and strengthening systems and procedures in addition to
 transparency in policy matters and management functions. The message of
 making the officials aware of the measures towards increasing
 efficiency and transparency in Customers Oriented Programmes was
 reiterated also during the Vigilance Awareness Programmes.
 
 As per instructions of CVC regarding increasing efficiency and
 transparency in customer oriented programmes, the measures initiated
 inter alia include (i) a system of lodging online complaint for speedy
 redressal of grievances (ii) adoption of anti-fraud policy (iii)
 adoption of Fair Practices Code etc.
 
 Agreed List for the year 2007 in respect of all Project Offices/CIRE
 were finalized in addition to its Corporate Office at Delhi after close
 interaction with local branches of CBI.
 
 24 PROGRESSIVE USE OF HINDI AS OFFICIAL LANGUAGE
 
 Continued efforts were made to comply with the directives of the
 Department of Official Language and the Offcial Languages Act, and most
 of the targets have been achieved.
 
 As a result of increased interest shown by the officers and staff,
 there has been significant increase in the notings and correspondence
 in Hindi.
 
 Quarterly review meetings of Official Language Implementation Committee
 were regularly held during the year 2007-08 under the chairmanship of
 CMD.
 
 To promote use of Hindi in official work, eight Hindi workshops were
 organized. 126 employees participated in these workshops. To give
 impetus to the correspondence in Hindi, standard formats have also been
 made available on Intranet. Bilingual working facilities have been made
 available in all the computers.
 
 During the year, Technical & Financial Glossary and Conduct, Discipline
 & Appeal Rules were published bilingually for use of all the employees
 so that they can work in Hindi more conveniently and in an effective
 manner. About 95% of Library budget was utilized for purchase of Hindi
 books. The Company’s Monthly House Journal ‘E-Darpan’ is published on
 line in digitized version, which includes activities of the Company and
 progress made in Hindi work.
 
 The Parliamentary Committee on Official Language inspected REC’s
 Project Offices at Hyderabad in July 2007 and at Bangalore in October
 2007. Rajbhasha Division also inspected 12 (twelve) internal Divisions
 as well as 7(seven) Project Offces during the year.  Ministry’s
 officials were also associated during some of the inspections. Project
 Offices of Chandigarh, Thiruvanantpuram got first and third prize
 respectively from Town Official language Committee for excellent work
 in Hindi. Project Office, Lucknow, also got a certificate for
 organizing workshops on Hindi.
 
 During the year, Zonal Office/Project Office Hyderabad, CIRE and
 Bangaluru were notified under Rule 10 (4) of Official Language Rules.
 
 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 the Hindi
 Pakhwara from 14.9.2007 to 28.9.2007.  57 officers and 45 employees
 participated in these competitions. Cash prizes and certificates given
 to 45 officers and staff & ten prizes were awarded for doing original
 noting/drafting throughout the year.  A special function was organized
 at which winners of these competitions were awarded prizes by the Chief
 Guest - Shri Uday Partap Singh, Hon’ble Member of Parliament and Member
 of Parliamentary Committee on Rajbhasha. Shri Ranjit Issar, Secretary,
 Rajbhasha, Ministry of Home Affairs was Guest of Honour at the
 function. On this occasion, artists from Song & Drama Division,
 Ministry of Information & Broadcasting presented folk dances of India
 on the theme of “Unity in Diversity”.
 
 REC’s website is available both in Hindi and English and is regularly
 being updated from time to time. All publications, reports, memoranda,
 press releases, mailers, tenders, advertisements relating to IPO, ERP,
 etc. were issued bilingually.
 
 25.  MOU WITH MINISTRY OF POWER
 
 The performance of the company in terms of Memorandum of Understanding
 signed with the Govt.  of India in the Ministry of Power for the
 financial year 2006-07 has been rated as “Excellent”. This is the 14th
 year in succession that the company has received “Excellent” rating
 since the year 1993-94 when the first MOU was signed with the
 Government.
 
 For the year 2007-08, the company has reached new milestones in
 sanctions and disbursement and is poised again for excellent rating.
 
 26.  NAVRATNA STATUS
 
 In pursuance of the national policy objective to make the public sector
 more efficient and competitive, Government of India had decided in the
 year 1997 to grant enhanced autonomy and delegation of powers to the
 profit making public sector enterprises, subject to certain eligibility
 criteria and guidelines, and confer the status of Navratna/Mini Ratna
 on select Public Sector Undertakings (PSUs) fulfilling the prescribed
 criteria.  In fulfilment of the prescribed criteria, Government of
 India had earlier granted Mini Ratna Grade I Status to REC in September
 2002.
 
 REC continued its consistently excellent performance and profitability
 in the subsequent years also and fulfilled the following enhanced
 criteria applicable for grant of Navratna status:
 
 a) Existing Mini Ratna Grade I status and a Schedule ‘A’ PSU;
 
 b) “Excellent” or “Very Good” MOU rating in 3 of the last 5 years.
 
 c) Getting Composite Score of 60 or above as per the Evaluation
 Criteria covering six specifc performance indicators viz.
 
 (i) Net Profit to Networth, 
 
 (ii) Manpower cost to total cost of services,
 
 (iii) PBDIT to Capital employed, 
 
 (iv) PBIT to Turnover,
 
 (v) Earning per share, and 
 
 (vi) Inter Sectoral Performance.
 
 In recognition of the excellent overall performance and qualifying all
 the prescribed criteria, and its continued significant contribution to
 the development of Indian Power Sector, Government of India recently
 granted “Navratna Status” to REC on 5th May 2008.  This prestigious
 status of Navratna is the highest recognition that any PSU can strive
 for, and only very few select PSUs in India enjoy this status. It is a
 matter of great pride and jubilation for all the stakeholders of the
 Company, as this enhanced status provides REC a greater flexibility and
 autonomy in terms of making investment and operational decisions, and
 would also help in further consolidating its position and continue its
 stellar role in funding the ever growing needs of Indian Power Sector.
 
 27.  COMPLIANCE WITH CORPORATE GOVERNANCE
 
 Till March 2008, the Code of Corporate Governance was not mandatory to
 REC, as only its Debt Securities/ Bonds, issued on private placement,
 were listed on the Stock Exchanges and the Company was only required to
 comply with limited provisions of the Model Listing Agreement as
 notified by SEBI. Even then, REC has been endeavouring to implement and
 maintain good Corporate Governance norms even when they were not
 mandatory.
 
 However, after the Initial Public Offer of equity shares and consequent
 listing of equity shares of the Company on the Stock Exchanges in March
 2008, the Code of Corporate Governance as per Clause 49 of the Listing
 Agreement has become mandatory. In addition, REC being a Central Public
 Sector Undertaking, with 88.12% of its paid up share capital currently
 held by the Government of India, the additional provisions relating to
 Corporate Governance as notified by the Department of Public
 Enterprises, Government of India are also applicable to REC.
 
 In compliance with the provisions of the Listing Agreement, a
 Management Discussion and Analysis Report is enclosed as a detailed
 Report of the Company on Compliance with Corporate Governance is
 enclosed as and a Certificate on Corporate Governance issued by the
 Statutory Auditors of the Company is enclosed as.
 
 28.  CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY
 
 A policy on Corporate Social Responsibility has been adopted by the
 Company. The details of the policy are posted on the REC’s website.
 
 29.  BOARD OF DIRECTORS
 
 As on the date of the last Annual General Meeting of the Company held
 on 27-9-2007, the Board of Directors comprised of following five
 directors:- 1) Shri A.K.Lakhina, Chairman and Managing Director;
 
 2) Shri H.D.Khunteta, Director (Finance);
 
 3) Shri Bal Mukand, Director (Technical);
 
 4) Shri Rajesh Verma, part-time Government Nominee Director /Joint
 Secretary & Financial Adviser in the Ministry of Power, Govt. of India;
 
 5) Shri Devender Singh, part-time Government Nominee Director / Joint
 Secretary in the Ministry of Power, Govt.  of India.
 
 Prior to the Initial Public Offer of equity shares, the Company was
 required to comply with the Code of Corporate Governance as prescribed
 by SEBI in the matter of composition of its Board of Directors i.e. in
 case the Chairman of the Company is an executive/full- time director,
 at least half of the Board had to comprise of independent directors as
 defined in Clause 49 of the Listing Agreement.
 
 Accordingly, in terms of Articles of Association of the Company, the
 Ministry of Power, Govt. of India appointed following part-time
 non-official / independent directors on the Board of REC for a period
 of three years:- i.  Shri Venugopal N. Dhoot, CMD, VIDEOCON Group of
 Companies, Mumbai (w.e.f. 20-12-2007);
 
 ii.  Dr. M. Govinda Rao, Director, National Institute of Public Finance
 & Policy, New Delhi (w.e.f. 20-12-2007);
 
 iii.  Shri P.R.Balasubramanian, Retired CMD, FACT, Bangalore (w.e.f.
 20-12-2007);
 
 iv.  Dr. Devi Singh, Director, IIM, Lucknow (w.e.f. 7-1-2008).
 
 The Ministry of Power, Govt. of India, withdrew the services of Shri
 Rajesh Verma, Joint Secretary & Financial Adviser, Ministry of Power,
 from the Board of REC as Government Nominee Director w.e.f. 9-1-2008.
 
 Shri A.K. Lakhina relinquished the charge of the post of Chairman and
 Managing Director of REC, on superannuation, w.e.f. 29-2-2008. In terms
 of the Articles of Association of REC, the Ministry of Power, Govt. of
 India, appointed Shri P. Uma Shankar as Chairman and Managing Director
 of REC w.e.f. 1-3-2008.
 
 The Board of Directors of REC currently comprises of eight directors,
 i.e. three full-time functional directors including Chairman and
 Managing Director, one part- time Government Nominee Director and four
 part-time non-official / independent directors.
 
 30.  JOINT VENTURE OF REC WITH IDFC
 
 On 25th February 2008, Board of Directors of REC has accorded in
 principle approval to set up a Joint Venture Company along with
 Infrastructure Development and Finance Corporation Limited on a 50:50
 equity participation basis in order to enter into the area of power
 distribution and consultancy.
 
 31.  SUBSIDIARY COMPANIES
 
 The provisions in the Electricity Act, 2003 provide new opportunities
 and challenges in the field of Transmission & Distribution and
 promotion of competition in the electricity industry is one of the key
 components. Ministry of Power, GOI notified “tariff based competitive
 bidding guidelines for transmission service” on 13.04.2006, enabling
 the framework for private sector investment in transmission sector.
 The main objectives of the guidelines are promoting competitive
 procurement of transmission services, and encouraging private
 investment in transmission lines.
 
 To identify projects for development under this scheme, an empowered
 committee under the chairmanship of Member, CERC was constituted. This
 committee identified 14 Projects for development through tariff based
 competitive bidding, for construction through the private sector
 participation, on Build Own and Operate (BOO) basis. Out of these 14
 Transmission systems, two projects viz (i) Evacuation system for North
 Karanpura and (ii) Talcher Augmentation system, were allocated to REC
 for selection of the developer through competitive bidding. To avail
 the benefits of these new opportunities and meet the challenges in
 power sector, REC has set up the following subsidiary Companies :-
 
 31.1 Rec transmission Projects company ltd. (Rec tPcl)
 
 REC TPCL was incorporated on January 8, 2007 as a Public Limited
 Company. It received its Commencement of Business Certificate on
 February 5, 2007. The main object of REC TPCL is to promote, organize
 and carry on the business of consultancy services and/ or Project
 implementation in any field of activity relating to transmission &
 distribution of electricity in India or abroad.
 
 REC TPCL has already taken up the task of selection of developer for
 the two transmission projects entrusted to REC. Technical consultants
 and Bid Process Consultants to assist REC TPCL in the process have
 already been appointed. Subsequently, under REC Transmission Projects
 Company Limited, two project specific SPVs namely (i) North Karanpura
 Transmission Company Limited (NKTCL), and (ii) Talcher II Transmission
 Company Limited (TTCL) have also been formed subsequently.  These SPVs
 would be merged with the Transmission Service provider (TSP) of the
 Transmission system after the developer is granted a license by the
 CERC.
 
 31.1.1 financial Performance during 2007-2008:
 
 Since REC TPCL and its two subsidiaries namely NKTCL and TTCL have not
 yet started its commercial operations, profit & loss account for these
 Companies were not prepared for the first financial year ended 31st
 March, 2008. In place there of Statement of Incidental Expenditure
 during Construction Period were prepared.
 
 The total expenditure as per the Statement of Incidental Expenditure of
 these Companies for the period ended 31-03-2008 are as under :-
 
 31.2 REC Power distribution company limited. (Recpdcl)
 
 RECPDCL was incorporated on July 12, 2007 as a Wholly Owned Subsidiary
 Company of REC Ltd. It received certificate of commencement of business
 on July 31st, 2007. The main objectives of Company, as set out in the
 Memorandum of Association, are as follows:
 
 1) To promote, develop, construct, own, operate, distribute and
 maintain 66 KV and below voltage class Electrification/Distribution
 Electric supply lines/ distribution system.
 
 2) To promote, develop, construct, own and manage Decentralized
 Distributed Generation (DDG) and associated distribution system.
 
 3) Consultancy/execution of works in the above areas for other
 agencies/Govt. bodies in India and abroad.
 
 31.2.1 Business during 2007-08
 
 RECPDCL has signed agreements with the following State power
 utilities:-
 
 1) The Company has signed an agreement with Jodhpur Vidyut Vitran Nigam
 Limited (JdVVNL) on 1.10.2007 for third party quality monitoring,
 supervision and inspection of the village electrification work awarded
 on turnkey basis by JdVVNL under Rajiv Gandhi Grameen Vidhyutikaran
 Yojana (RGGVY) covering 4399 nos.  villages in 7 districts having
 project cost of Rs. 84.88 crore. RECPDCL would get a Consultancy fee of
 2% of the project cost from JdVVNL.
 
 2) The Company has signed an agreement with Punjab State Electricity
 Board (PSEB) on 10.12.2007 for consultancy services for selection of
 developer through International Competitive Bidding Process for supply
 of 1800 MW+ 10% power to PSEB on tariff based bidding under Case-I of
 MOP Guidelines. RECPDCL would get a Consultancy fee of Rs. 12.5 Crore
 from PSEB.
 
 3) The Company has signed an agreement with Ajmer Vidyut Vitran Nigam
 Limited (AVVNL) on 4.3.2008 for third party quality monitoring,
 supervision and inspection of party quality monitoring, supervision and
 inspection of the village electrifcation work awarded on turnkey basis
 by AVVNL under Rajiv Gandhi Grameen Vidhyutikaran Yojana (RGGVY)
 covering 4693 villages in 5 districts having project cost of Rs. 127.63
 crore and Feeder Renovation Programme (FRP) works for 1783 feeders
 under execution and 651 completed feeders having project cost of Rs.
 850.38 crore & Rs. 323.01 crore respectively. RECPDCL would get a
 Consultancy fee of 2% of the project cost for RGGVY & FRP (feeders
 under execution) works and 1% of the project cost for FRP (completed
 feeders) works from AVVNL.
 
 31.2.2 financial Performance during 2007-08
 
 During the first accounting period ended 31st March, 2008, RECPDCL has
 been able to generate an Income of Rs.3.59 crore and Proft before Tax &
 after Tax is Rs. 2.70 crore & Rs.1.78 crore respectively.
 
 32.  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.
 
 32.1 RTI Machinery in Rec
 
 CORPORATE Office:
 
 (A) Departmental Appellate Authority
 
 Shri Rama Raman,
 
 Executive Director (T&D)
 
 (B) Public Information Officer
 
 Shri B.R.Raghunandan,
 
 General Manager (Law) & Company Secretary
 
 (C) Asstt. Public Information Officer
 
 shri a.k. arora,
 
 Chief Manager(RTI/P&C)
 
 33.  STATUTORY AUDITORS
 
 M/s G.S. Mathur & Co., Chartered Accountants were appointed by the
 Comptroller and Auditor General of India as Statutory Auditors of the
 Company for the financial year 2007-08, for the Third year in
 succession.  The Statutory Auditors have audited the Accounts of the
 Company for the year ended 31st March, 2008.  Accordingly, following
 documents are annexed to this Report :-
 
 a) Audited Accounts of the Company and Cash Flow Statement for the year
 ended 31st March 2008;
 
 b) Annexure to be enclosed with the audited Balance Sheet for NBFC
 Companies as prescribed by RBI;
 
 c) Audited consolidated Financial Statements of the Company for the
 year ended 31st March 2008;
 
 d) Auditors’ Report on the Audited Accounts of the Company for the year
 ended 31st March 2008;
 
 e) Non-Banking Financial Companies Auditors’ Report, as prescribed by
 RBI.
 
 f) Auditors’ Report on the Consolidated Financial Statements of the
 Company and its Subsidiaries.
 
 34.  COMMENTS OF CA&G OF INDIA
 
 The Comptroller and Auditor General of India has reported 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.
 
 35.  FINANCIAL STATEMENTS / DOCUMENTS UNDER SECTION 212 OF THE
 COMPANIES ACT, 1956.
 
 The financial statements and other documents in respect of above
 Subsidiary Companies are included as a part of the Annual Report in
 pursuance of Section 212 of the Companies Act, 1956.
 
 36.  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 Company’s 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 extend their special thanks to the Ministries of
 Power & Finance including the Department of Disinvestment, Securities
 and Exchange Board of India and Reserve Bank of India for their timely
 intervention and support in successful completion of Initial Public
 Offering of shares by the Company.
 
 The Directors take this opportunity to express their sincere gratitude
 to all the esteemed Investors for the trust and faith reposed by them
 in the Company and making its Initial Public Offering of shares a grand
 success and facilitating oversubscription of IPO by almost 27 times,
 when the capital market was very volatile.
 
 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 and JBIC of Japan in
 the fund raising programmes of the Company.
 
 The Directors also thank the Statutory Auditors M/s G.S. Mathur & 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 successfully to break the previous
 records of excellent performance and move forward to climb greater
 heights and enabling conferment of Navratna Status on the Company by
 the Government of India.
 
                            For and on behalf of the Board of Directors
 
 New Delhi                                             (P. Uma shankar)
 28th July, 2008                           chairman & Managing director