GoM calls for power sector disinvestment

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New Delhi, Apr 28 To meet the UPA administration’s ambitious target of adding fresh capacity of 1,11,000 mw during the 11th Five-Year Plan, the group of ministers (GoM) examining the finances of the power sector has proposed that the government divest up to 49% of its stake in profitable central power sector Companies. They include NTPC, PFC, REC, PGCIL and NHPC.

The GoM, headed by Planning Commission deputy chairman Montek Singh Ahluwalia, has suggested a combination of initial public offerings and follow-on public offers to generate about Rs 1,66,000 crore. But this would cover no more than a third of the Rs 4,38,319-crore investment required in the sector during the 11th Plan period.

To ensure that funds from any such disinvestment are ploughed back for investment, the ministerial panel has recommended they be routed through the new National Electricity Fund announced in this year’s Budget. Disinvestment funds usually go into the National Investment Fund that finances social sector projects and reviving sick PSUs.

While the UPA’s National Common Minimum Programme rules out privatisation of profit-making PSUs, it allows them to access the capital market to enhance their equity base. As the Companies earmarked for possible disinvestment are Navratnas, the government would first have to change its current policy that prohibits stake sales in such organisations.

The money raised from the disinvestments would be used to fund power projects, as well as improve outdated transmission & distribution systems in many states. Another significant suggestion made by the GoM is that rural electrification, decentralised distributed generation projects, and micro hydel projects with investments of less than Rs 10 crore each be treated as ‘priority sector lending’ by the banking sector.