Moily against stake sale in Powergrid

As the government gets ready with its disinvestment plans for the current fiscal - with the Cabinet clearing the first divestment in NMDC - the power ministry has opposed the sale of government's equity in India's largest state-owned transmission company, the Powergrid Corporation of India Ltd. Anupama Airy reports.

As the government gets ready with its disinvestment plans for the current fiscal - with the Cabinet clearing the first divestment in NMDC - the power ministry has opposed the sale of government's equity in India's largest state-owned transmission company, the Powergrid Corporation of India Ltd.

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In an October 10 letter to finance minister P Chidambaram, the outgoing power minister Veerappa Moily said that disinvestment of Powergrid has already taken place twice - in September 2007 and November 2010 - for 5% and 10% of share capital of the company respectively, fetching Rs. 994 crore and Rs. 3,721 crore to the centre.

"Any further disinvestment in Powergrid (proposed at 5% for this fiscal) may be deferred by the government at this stage as it may be detrimental to company's growth and power sector as a whole," Moily wrote to Chidambaram.

The power ministry has recently also opposed Chidambaram's plans to push the disinvestment of the government's equity in NTPC, which is India's largest power generating company.

However, NTPC being a big ticket divestment - with the finance ministry expecting to rake in R13,500 crore or nearly half of its disinvestment target for the current fiscal from the NTPC issue alone - the contentions of the power ministry have been set aside with clear instructions to the department of disinvestment to proceed ahead with a 9.5% stake sale in the state-owned power firm.

Stating that the current debt-equity ratio of Powergrid is 70:30 - with debt at Rs. 58,000 crores and equity at Rs. 24,300 crores - Moily said that of all the 15 listed major central public sector undertakings (CPSUs), Powergrid is the most highly leveraged.

The government currently holds 69.42% stake in Powergrid and the proposed disinvestment is for sale of 5% equity.

Moily also told Chidambaram that an investment plan of more than Rs. 100,000 crore has been chalked out for the company, during the 12th 5-year Plan.