India plans power sector mergers to raise ₹ 20,000 crore

The government is planning to sell its stake in SJVN Ltd and Power Finance Corporation to NTPC and Rural Electrification Corporation, respectively, with an aim to rein in India's fiscal deficit

Siddhartha Singh & Rajesh Kumar Singh, Bloomberg
Updated24 Sep 2018, 07:25 PM IST
The first such power sector merger happened last year when ONGC acquired the government’s stake in HPCL.
The first such power sector merger happened last year when ONGC acquired the government’s stake in HPCL.

New Delhi: India is planning to sell its stake in SJVN Ltd and Power Finance Corp. to other government-controlled companies in deals that may fetch the federal government about 20,000 crore, helping it to rein in the fiscal deficit amid growing risks of a slippage, people with knowledge of the matter said.

The government plans to sell its 63.8% stake in hydropower producer SJVN to NTPC Ltd, the nation’s largest thermal power producer, to garner about 8,000 crore, the people said, asking not to be named as the information isn’t public. The other deal being considered will see Rural Electrification Corp. Ltd buying the federal government’s 65.6% ownership in Power Finance Corp. Ltd, they said.

While helping the government raise resources to meet its budget fiscal deficit target, the discussions reflect Prime Minister Narendra Modi’s aim to create larger energy companies through consolidation. The first such power sector merger happened last year when Oil and Natural Gas Corp. Ltd (ONGC) acquired the government’s stake in state-controlled refiner Hindustan Petroleum Corp. Ltd (HPCL).

“This is disinvestment by proxy,” Amit Mantri, founder of 2Point2 Capital Advisors, said by phone. “By selling stake in one state-run company to another the government can claim to have monetized its stake. But this is only an optical reduction in fiscal deficit.”

Finance ministry spokesman D.S. Malik didn’t answer two calls to his phone. Modi’s government has only raised 9,200 crore so far from asset sales, compared to a target of 80,000 crore for the fiscal year ending 31 March.

Bloomberg’s Santanu Chakraborty contributed to this story.

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First Published:24 Sep 2018, 07:25 PM IST
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