UPA Government plans for Power sector PSU selloff
Tuesday, 02 June 2009 Economic Times

Support from the left during last five years deterred UPA from selling shares of profit making public sector companies
The new government may kickstart its big-ticket disinvestment plan by diluting stakes in power sector firms such as NTPC, NHPC and Power Grid Corporation to 51% over the next few years. The exercise is expected to fetch around Rs 60,000 crore, while an equal amount will be mobilised by these public sector units (PSUs) to carry out their expansion plans. The amount raised will help the companies meet part of their funding needs. The sector requires over Rs 10,00,000 crore in the next three years.

“A proposal in this regard has already been moved by a committee headed by Planning Commission deputy chairman Montek Singh Ahluwalia and officials with power and finance ministries. The committee’s recommendations are expected to drive the policy for power sector during the current Plan,” said a power ministry official.

“Disinvestment in power sector PSUs would be undertaken through a combination of follow-on public offers by listed power utilities and initial public offers by others,” said the official, who asked not to be named. Profit-making PSUs such as NTPC, Power Finance Corporation, Rural Electrification Corporation, PGCIL, NHPC and North Eastern Electric Power Corporation will be encouraged to mobilise funds to the tune of Rs 60,000 during the Eleventh Plan through initial offers and follow-on offers.

The government will piggyback these issues to divest its shares and raise Rs 60,000 crore. While doing so, the committee has suggested, PSUs will have to ensure that the government holding does not fall below 51%.
It has been suggested that PSUs be permitted to tap the market at regular intervals over the next few years to mobilise resources for carrying out their ambitious expansion and modernisation plans. This will gradually bring down government holding in these companies.

While NTPC has already tapped the market with an IPO in 2004, PFC and PGCIL entered the market with IPOs in 2007. REC’s initial offer came in early 2008, while the public offer of NHPC was deferred last year due to poor market conditions.

NTPC has been planning a follow-on offer for some time, but could not secure a government approval.
While the UPA government wanted to go in for a big-ticket disinvestment plan in power sector earlier, it could not do so because of the opposition from Left parties, which were supporting the minority government. However, it managed to divest 5-10% of its shares in NTPC, PGCIL, PFC and REC through IPOs.