DRUM seeks to introduce strategic planning, design and alternative financing concepts to advance electric power distribution reforms in India. One of the key interventions under DRUM Project would be to help development of alternative financing/lending mechanism to support broad distribution reforms in rural electrification. The experience of rural utility financing in the United States for cooperatively owned and operated entities both with and without public financing has important lessons for India. The Rural Utility Services of USA funded electric cooperatives with debt capital to cover 100% of the cost of building distribution systems and instituted and implemented a comprehensive system of financial and operating controls, governance operating standards and oversight procedures to guide the operations of cooperatives.

The US experience demonstrates clearly that it is possible to develop credit worthy entities starting from relatively modest beginning. Therefore, for the purpose of developing a viable alternative financing/lending mechanism for rural electricity sector in India, assistance of Rural Utility Services (RUS) of the United States Department of Agriculture (USDA) would be obtained by Rural Electrification Corporation (REC).

The Ministry of Power has nominated PFC as the Principal Financial Intermediary for the DRUM project and the Rural Electrification Corporation as the Primary Beneficiary under the RUS Participatory Agency Agreement component of the DRUM project. The Ministry has also selected four states namely, Karnataka, Maharashtra, Gujarat and Delhi as DRUM partner states and four pilot projects respectively at Dodaballapur, Aurangabad , Umreth and Shakti Nagar have been proposed. A Joint Statement was signed by

RUS of USDA and REC expressing their intention to cooperate under DRUM Project in developing, testing and replicating models that would result in improved rural electrification in India.

REC-RUS cooperation activities have started in January 2005 and is scheduled to continue upto Sept 2007 in accordance with a Work Plan developed jointly by REC and RUS. In pursuance of REC-RUS joint Work Plan, a delegation of officers from Ministry of Power, REC, PFC and nominees of other stakeholders visited RUS facilities in USA in the month of May 2005. Based on the experience gathered during this visit, a draft outline of an alternative model for rural electrification has been proposed.

Click to view the Joint statement between REC, Government of India & RUS, U.S. Department of Agriculture