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$1.8-bn WB funds for three PSUs

The government is planning to infuse $1.8 billion in three public sector undertakings as a part of its plan to boost public spending and provide relief to micro...

Written by Gunjan Pradhan Sinha | New Delhi | Published: February 18, 2009 12:19 am

The government is planning to infuse $1.8 billion in three public sector undertakings as a part of its plan to boost public spending and provide relief to micro,small and medium enterprises (MSMEs) hit by the economic slowdown. The three companies that have been finalised as beneficiaries for this additional World Bank loan include India Infrastructure Finance Corporation Limited (IIFCL),Power Grid Corporation of India Limited (PGCIL) and Small Industries Development Bank of India (Sidbi). The funds are being sought as a part of the $5.2 billion additional loan being sought from the World Bank by the Government of India.

“About $3.4 billion will be infused towards the capitalisation of banks. Remaining will go to these companies that are agents for taking counter cyclical measures in these difficult times,” a senior finance ministry official said. The plan is to capitalise another 6-7 banks over the next two years and this is the first time probably that multi-lateral funds will be used to recapitalise banks,the official added.

The funds will be infused by way of existing programmes that the World Bank has in association with PSUs. Sidbi is expected to get $200 million of the loan,IIFCL will get $600 million and a major chunk of around $1 billion will be directed to PGCIL.

PGCIL will use the funds to expand the power transmission network in the country. This will include laying down new transmission lines to provide electricity to rural households.

As far as IIFCL is concerned,the funds will be used to kick start new projects in the power sector and roads & highways. IIFCL provides loans to infrastructure firms for importing capital goods as well as for financing infrastructure projects. Since its inception two years ago,the company has achieved financial closure in over 70 projects.

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