Addressing the newspersons he said, the power company would offer half of the amount to the ministry of finance by the end of this year balance would be given during the next fiscal. The ministry may use this funds to cut down the budget deficit.

He said that NTPC will sell some of its units and use the sale proceeds for reinvestment. The sale proceeds will not be used to offset budget deficit by the Centre, he added.

With this move, NHPC would become the wholly-owned subsidiary of NTPC. However, NHPC would have separate operation and would continue to promote hydel generation in the country.

"This was one of the best options available for the government to generate additional resources," said Kumarmangalam, adding that through this procedure the government still retains the equity of the company which has been sold out.

Nothing has changed in actual terms, he said. Instead of the government controlling NHPC, NTPC will control it. "Everybody wins in the process," he said.pApart from this NTPC's skilled management support would help increase hydel power generation. "The country desperately needs to enhance hydel generation which not only will help in meeting demand for electricity in the country but also provide better management of electricity load," he stated.

The hydel power which helps peaking demand management is also a better option in terms of cost and environmental concerns. The country requires a better mix of thermal and hydel power generation, he said, adding that there is a huge potential for hydel power genertion and NTPC would target to utilise most of it by the new acquisition.

The minister said that the proposal was forwarded by NTPC some months ago. The thermal power company had been contemplating to get into hydel power generation for some time and recently announced its intention for this diversification. The proposed acquisition would offer the company the technical support needed for the diversification, he added.

NTPC which currently generates 19,500 mw is already in race for one of the hydel power plant to be set up in Himachal Pradesh. The company which has established its expertise in revamping old power plants to get maximum generation can now also take up the underutilised power hydel power plant to enhance the capacity.

INSIGHT:

Big gains tomorrow
The government seems to be desperate for cash. The one time cash outflow of Rs 4,000 crore will mean that NTPC will have to put its other expansion plans on hold and that will affect not only NTPC but the power plant equipment suppliers also.

After a cash outgo of Rs 4,000 crore in two years, NTPC won't have funds for expansion at least for the next couple of years and that means no orders. Worse, since profits are booked only when the project is at an advanced stage, profits will be delayed for an even longer period. However, because the acquisition is at par, the dividend in percentage terms will be healthy.

The argument is that post acquisition, NTPC will be able to raise funds from the market on the strength of subsidiaries balance-sheet also. The thinking seems to be to sell off some assets of NTPC to pay for the deal, or to transfer some assets of NTPC to a subsidiary and raise cash by offering a stake in the subsidiary. But the timing of the cash inflow and outflow will be different, and NTPC would be out of pocket in the meantime. The buyers would also be interested in knowing why NTPC is interested in transferring units. After all, NTPC's record of running units has been excellent.

-- Urmik Chhaya