Market offer norms may be relaxed for power PSUs
POWER sector public offers are all set to hit the markets in a big way in coming months with government considering a proposal to allow all power PSUs to enhance their equity base through initial public offers (IPO) and follow on public offers (FPO) and raise in excess of Rs 60,000 crore over next four years. The move is aimed at meeting the equity shortfall for the power sector that is estimated to be in excess of Rs 1,80,000 crore during the Eleventh Plan (2007-2012). The proposal to relax market offer norms for power sector PSUs has been favoured by a sub-committee of group of ministers on financial issues. The committee’s recommendations are expected to drive the policy guidelines for power sector during the current Plan. The prime minister’s office has mandated the GoM to suggest measures to bridge the funding gap for the sector. As per the proposal, which would first have to clear the Left’s scrutiny, profit making PSEs like NTPC, Power Finance Corporation (PFC), Rural Electrification Corporation (REC), Power Grid Corporation (PGCIL), NHPC, North Eastern Electric Power Corporation (Neepco) etc would be encouraged to mobilise funds to the tune of Rs 60,000 during Eleventh Plan through IPOs and FPOs. While doing so, the committee has suggested, PSEs would have to ensure that government of India holding is not brought below 51% mark. While power sector PSU NTPC has already tapped the market through IPO few years back, PFC and Power Grid Corporation’s (PGCIL) IPO were launched this year. Initial offers of two other PSUs - REC and NHPC - are expected to hit the markets soon. NTPC is also planning a FPO to raise resources for its expansion programme. If the committee’s proposal is accepted, these PSUs would be permitted to tap the market at regular intervals over next four years to mobilise resources for carrying out ambitious expansion and modernisation programmes. The IPOs of three PSEs - NHPC, REC and Power Grid are targeted to mobilise a mere Rs 6,000 crore. This is considered too low for the requirements of the sector. The committee is also considering a proposal that would allow transfer of proceeds from sale of government equity in a power sector PSE to a separate power fund. This would then be utilised for funding power sector projects. This would, however, require separate approval from the finance ministry that has set up a National Investment Fund (NIF) to park disinvestment proceeds.