A recent board meeting had approved Power Finance Corporation's borrowing plan and the funds raised from the private placement would be used for disbursing the requirements of the power sector for the current fiscal.Power Finance Corporation plans to issue tax free unsecured, redeemable, non-convertible bonds in one or more tranches, with the first tranche of Rs 75 crore. The corporation also has the option to retain oversubscription to the extent of Rs 75 crore.

The tax-free bonds to be issued for a period of seven years will carry a interest rate of 10.5 per cent per annum and offer a call and put option at the end of five years, sources said.

Power ministry has authorised PFC to raise Rs 150 crore through non-taxable bonds and another Rs 875 crore through taxable bonds, sources said,adding Rs 875 crore would include loans from banks.

PFC also plans to raise over Rs 500 crore in the second half of the current financial year by floating public bonds for the first time, sources said.Power Finance Corporation has already mopped up $100 million (about Rs 400 crore) through external commercial borrowings (ECB) shortly after nuclear tests.

It has arranged for a loan of Rs 200 crore from the State Bank of India and Rs 100 crore from Punjab National Bank while another Rs 100 crore is being arranged through internal resources. Power Finance Corporation has the option of switching to domestic market in case international market conditions are not favourable, sources said.

The corporation has set its disbursal target at Rs 2500 crore during the current year. PFC had disbursed Rs 2025 crore in 1997-98 against the target of Rs 1500 crore and sanctioned funds to the tune of Rs 2932 crore which was higher by Rs 818 crore in the previous year.