Can the rigid mandate of the National Investment Fund (NIF) be relaxed in the new political climate? It would seem so, according to a proposal under discussion between the finance ministry and the Planning Commission.
Faced with the challenge of locating Rs 10.59 lakh crore ($252.14 billion) to finance the investment shortfall in the power sector until 2012, the government is planning to dip into the NIF. Just for comparison, the sum is about one-and-a-half times more than the entire central government Budget.
The plan, put up by the department of economic affairs in the finance ministry, says rather than let the funds?accruing from disinvestment in state-run companies?lie parked in the NIF, the government should let a national electricity fund invest it in the power sector.
?It needs to be seen whether such a large quantum of disinvestments is feasible in the limited time span (of four years). The possibility of altering the extant scheme of investment of NIF has to be examined,? says the ministry?s concept paper.
This would mean reducing the government?s holding in five public sector power companies?NTPC, NHPC, Powergrid, PFC and REC?from the existing 81.82-89.78% range. Bringing the stake down to 51% would mean disinvestment of shares from 30.82% to 38.78% of their paid-up capital.
Confirming the development, government officials involved in the process said this would involve changing the mandate of the NIF by the Cabinet. The common minimum programme that the present government had agreed upon with its former allies, the Left parties, stated that disinvestment proceeds should be sequestered in the NIF.
The funds are meant to be deployed in capital markets to earn returns, from which 75% should be used for the social sector and the rest for the revival of public sector enterprises. The corpus of the fund is Rs 994.82 crore. Public sector fund managers expect to make the first annual returns to the NIF next month.
The government is also exploring the feasibility of raising a special line of credit worth $10 billion (around Rs 44,000 crore) from multilateral agencies to finance the investment requirements of the planned power projects, especially in the transmission & distribution (T&D) segments.
Out of total requirement of Rs 10.59 lakh crore for various power sector schemes during the 11th Plan period, around Rs 4.49 lakh crore is the investment required in T&D projects alone. The requirement of state sector T&D schemes is around Rs 2.72 lakh crore.