A senior Hudco official said at the present rate of 10 per cent, the corporation is expected to suffer a loss of Rs 988 crore over the next 15 years on this account.

The official said enhancement in additional authorised capital from Rs 385 crore to Rs 1250 crore has not been able to bail out the state-owned corporation. The organisation has a paid-up capital of Rs 898 crore.

The corporation has also fallen short of meeting the rural housing targets assigned to the corporation because of this, he added.The proposal is pending with the ministry of urban development and poverty alleviation and it will soon seek Cabinet's nod on the issue.

As per the proposal, Hudco has suggested that it may be allowed direct subsidy or indirect incentives like access to tax-freebonds, access to priority sector funds from banks and exemption from stamp duty.

It is learnt that the ministry has offered two options which included an increase of interest rates on EWS loan to 12 per cent and equity support from the government be kept at Rs 270 crore. Alternatively, the interest rates may be revised to 12.5 per cent enabling the corporation to make a marginal profit.

An increase in the interest rate on loans to 12 per cent and maintenance of equity support at the same level will enable the company to break-even on the scheme for the category. Increase in interest rates from the present 10 per cent to 12.5 per cent, on the other hand will help the corporation make a marginal profit.

Despite repeated attempts, the CMD of Hudco V Suresh was not available for comments but insiders said marginal hike in the interest was imperative as Hudco had to bear huge losses on loans to lower income groups and housing schemes for economically weaker sections.