The acquisition proposal is under government's consideration and the powerministry would soon move a cabinet note. The acquisition would bring aboutsynergies in the operation of the two power companies, improve performanceof power sector as a whole and improve hydel generation. "The associationwould help utilise and leverage NTPC's financial strength and NHPC'stechnical expertise for developing the hydel sector in the country",Kumaramangalam said.

A final decision on the acquisition would be taken only after properconsultations, but Kumaramangalam assured that the management of NHPC willnot be diluted and there will be synergy in the operation. He also clarifiedthat the proposed acquisition was not a cross holding between the twocompanies and the amount so raised would not be fully used to reduce thefiscal deficit. He said that only a part of the funds would be used to bringdown the fiscal deficit.

NTPC's reserves today stand at over Rs 12,000 crore and Rs 4,500 crore wouldbe used to fund the acquisition of NHPC shares. The amount would betransferred to the consolidated India fund in two tranches. The firsttranche of Rs 2,500 crore would be released during the current fiscal.

Also on the anvil are a series of steps to consolidate central powerutilities that would help meet the power targets and would also synergisethe power sector's long-term requirements. Kumarmangalam said that thegovernment was planning securitisation of dues of various PSUs through aspecial purpose vehicle (SPU), create a joint venture Brahmaputhra HydroDevelopment Corporation with participation of all the PSUs for setting up a21,000 mw hydel power project.

ICICI has been appointed consultant to recommend various ways forrestructuring, which is expected to submit its report within six months.NTPC is making a foray in the hydel sector with a Rs 4,000 crore Koel Damhydro power project in Himachal Pradesh. NHPC's acquisition would help NTPCuse its technical expertise in executing the project.

The target of adding a capacity of around 40,000 mw during the Ninth Planwould fall short by close to 18,000 mw, mainly because of the privatesector, said Kumarmangalam.

As many as 96 new projects have already been cleared which will add anadditional capacity of about 54,700 mw and the state governments have beenable to provide escrow cover of around 20,000 mw only.