Govt plans Rs 90,000 cr fund to plug loopholes | business | Hindustan Times
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Govt plans Rs 90,000 cr fund to plug loopholes

The government plans to set up a Rs 90,000-crore national electricity fund. The fund will lend money to state electricity boards at low rates of interest, report Gaurav Choudhury & Samiran Saha.

business Updated: Sep 14, 2008 20:42 IST

The government is planning to set up a Rs 90,000-crore national electricity fund (NEF). The fund will lend money to state electricity boards at low rates of interest to plug transmission and distribution losses.

A concept note, which lays down the broad structure of the fund, has listed resources raised through disinvesting government stake in state-owned power companies as a possible source for setting up the corpus.

The government holding in four listed power sector companies — NTPC, Power Grid, Power Finance Corporation and Rural Electrification Corporation — ranges from 89.8 per cent to 81.8 per cent.

A top government official who did not wish to be identified said that it needs to be seen to what extent the government is able divest its equity in power sector companies.

The government plans to raise about Rs 40,000 crore as low interest credit from multilateral funding agencies such as the World Bank and the Asian Development Bank. The remaining Rs 50,000 crore would be raised from various sources, including disinvestment.

Theft and pilferage losses, often referred to as transmission and distribution (T&D) losses, are as high as 40 per cent in India. The total annual T&D loss in India is estimated at Rs 40,000 crore.

An executive of a government-owned power company said using disinvestment proceeds for setting up the electricity corpus would require changes in existing norms.

Last year, the government launched the national investment fund (NIF), which would channelise proceeds from government divestment in all public sector undertakings. NIF will utilise 75 per cent of its annual income to finance select social sector schemes that promote education, health and employment. The remaining 25 per cent will be used to meet the capital investment requirements of profitable and revivable central public sector enterprises.

NIF will be operated by the fund managers under discretionary mode of the portfolio management scheme, governed by SEBI guidelines.

A committee headed by the Planning Commission member for power isconsidering various aspects of the fund.