Power ministry sources told FE that the ministry had emphasised the need for this relief at a time when the Centre has launched an ambitious rural electrification programme. So far, only REC was authorised to finance power projects in rural areas. However, in view of funds requirement for such projects, both PFC and REC need to be authorised to finance.
Moreover, the ministry has suggested that PFC and REC may be permitted to issue tax-free bonds to raise capital to fund decentralised distributed generation projects for supply of electricity in rural areas.
PFC chairman and managing director VK Garg said that the corporation has been pursuing a proposal to set up a venture capital fund called Indian Power Fund (IPF) to invest in power sector projects. According to him, the corporation is in the process of incorporating this fund and it will become operational in the near future. PFC has committed Rs 200 crore to this fund while Oriental Bank of Commerce has agreed to invest Rs 10 crore in the IPF.
Include PFC bonds in the definition of long-term specified assets and notify under
Ministry sources said it had suggested the finance ministry that an investment allowance at 20% annually of the contribution for five years to IPF be allowed under a new section 33 C. IPF would help receive funds for various power projects and thereby achieve the Centre's target of power for all by 2012, the ministry sources noted.