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Govt. plans $11 Billion power sector debt fund
By siliconindia
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Tuesday, 27 July 2010, 22:58 IST |
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New Delhi: To conduit the funding shortfall and to ease the financing of power sector projects, the government is planning to create an $11 billion debt fund which is expected to accelerate the economic growth and to fill in the shortage of power sector in the country, reports Utpal Bhaskar from the Mint.
"The fund is in the process of being formulated." The paper quopted P Umashankar, Union Power Secretary as saying. "Any power sector project that has crossed the stage of uncertainty such as construction will benefit from this. The fund will also create room for the banks to lend," added Umashankar.
The fund would be the latest in a series of recent government measures to overhaul India's creaky infrastructure, long seen as a drag on growth in Asia's third-largest economy. A separate $11 billion debt fund for infrastructure has already been announced and could be implemented by the end of the year.
The funding ability of Indian institutions is restricted by central bank limits on how much they can lend to each sector or business group. As a result, the country's target of adding 160,000MW of capacity in the 11th Plan (2007-12) and 12th Plan (2012-17), requiring a total investment of Rs18 trillion, hinges on the ability to mobilize debt.
The preparatory meetings for the fund will be held under the chairmanship of Deepak Parekh, chairman of Housing Development Finance Corp. Ltd. Officials of the Planning Commission, the Union power ministry, state-owned power sector lending institutions such as Power Finance Corp, Rural Electrification Corp, and the Central Electricity Authority, India's apex power sector planning body, will participate in the meetings.
India has been for long contemplating setting up such infrastructure funds. Bloomberg had reported on 14 May about plans for an $11 billion debt fund to build ports, roads and bridges, citing Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission. The report added that the sponsors of the power sector fund may be a combination of organizations such as PFC, REC, Life Insurance Corp. of India, State Bank of India, Infrastructure Development Finance Co. Ltd and IIFCL, among others.
It may also include investment banks and non-banking financial companies along with multilateral funding agencies such as the International Finance Corporation and the Asian Development Bank to attract foreign investors.