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Rs 50-crore equity boost for PFC likely in Budget

Balaji C. Mouli

Shaji Vikraman

NEW DELHI, Feb. 25

THE Government is set to provide for an infusion of Rs 50 crore into Power Trading Corporation (PTC) as its equity contribution in the coming Budget.

According to officials, the Government plans to infuse Rs 300 crore over the next six years, amounting to 10 per cent of the equity base of PTC. By putting in its money, the Government is hoping to enthuse other shareholders, mainly, the institutional in vestors and Central power sector undertakings, to follow suit and enhance the capital base.

The aim is to push up the authorised share capital to Rs 5,000 crore and the paid-up capital to Rs 3,000 crore.

The higher equity base would be used to provide payment security comfort for the sponsors and lenders of `mega' power projects.

Currently, the low equity base of PFC is acting as a deterrent in attracting investments in the company, which will be an intermediary between the mega power producers and the purchasing States.

PTC has been promoted by the National Thermal Power Corporation, the Power Grid Corporation of India and the Power Finance Corporation. PowerGrid holds 30 per cent of the capital, with other two companies holding 15 per cent each.

At a recent meeting between the institutions and the Government, officials in the FIs pointed out that two areas of concern relating to investment security -- continuous payment and termination -- were yet to be resolved satisfactorily.

In the case of continuous payments to avert defaults, the Centre had mooted the idea of a large equity base which would be leveraged to meet power bills of the project sponsors up to a period of six months in the event of default by the purchaser.

Here, the institutions have pointed out that there is no way to ensure commitment on the part of the Government to fulfil its promise of an equity contribution of 10 per cent over the next six years.

In the event of termination of the power project, the FIs reckon that the Centre would be required to provide guarantee for payment of outstanding liability.

This proposal was earlier turned down by the Government when it decided against providing sovereign guarantees to power projects.