The government is seeking to expand the mandate of the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), the two financial institutions in the power sector, to fund the modernization and expansion plans of power-equipment manufacturers.
The power ministry, which is piloting the proposal, is also looking at the option of allowing the two entities to float venture-capital funds to encourage the manufacturing of critical quality components used for power infrastructure.
The move will benefit existing power-sector equipment manufacturing firms such as Bharat Heavy Electricals Ltd and also provide incentives to new companies willing to enter the market. “This is being considered to promote the ready market for such products at competitive rates,” a power ministry official who did not wish to be identified said.
The recommendation is part of a government working group report, submitted as an input for the preparation of the 11th Five-Year Plan (2007-12) for the power sector.
“If this happens, it will give a tremendous fillip to the power sector by meeting the funding demands of equipment manufacturers,” said A.K. Lakhina, chairman and MD, REC.
Shubhranshu Patnaik of PricewaterhouseCoopers also welcomed the move and said, “This is a positive step and in order to achieve this, there should be a capacity-building exercise for these two organizations as they will have to increase their lending portfolio.”
While PFC sanctioned loans worth about Rs20,000 crore in the first half of this financial year, REC is expected to fund projects worth Rs10,000 crore in 2006-07.