Power Finance gets nod to tap capital market

PFC, which classifies as a non-bank finance company (NBFC), is completely owned by the government of India and has an equity base of Rs 1,030 crore. The 10 per cent IPO, therefore, means that around Rs 103 crore of government equity would be offered to the public through listing in the capital market.

The IPO would expand the company’s equity base by the same amount. However, if the disinvestment plans also go through, then the government holding would come down in proportion to the new equity base.

PFC would be the second power PSU after the National Thermal Power Corporation that the UPA government has allowed to be listed. Official sources said that PFC’s proposal for the IPO was circulated to the cabinet only a month back.

PFC is a special finance company created under the power ministry in the late 80s to undertake financing of state-level power projects as well to meet the capital requirements of state-level utilities including their working capital. The company has a total debt of Rs 27,000 crore.

On the tariff policy, after giving an in-principle nod on Thursday, power ministry officials along with finance ministry officials and the Planning Commission met today to give the final touches and incorporate the changes recommended by the Cabinet.

At the meeting between PMO’s Prithviraj Chauhan, deputy chairman of the Planning Commission Montek Singh Ahluwalia and finance minister P Chidambaram held today, the Cabinet recommendations related to some crucial wordings on ways to phase cross-subsidy were discussed.

The tariff policy says states need to limit surcharge for open access to 20 per cent of the opening balance by 2011.