Power Finance Corporation eyes stakes in power cos via IPOs

The power sector has registered significant progress since the process of planned development of the economy began in 1950. Hydro -power and coal based thermal power have been the main sources of generating electricity. Nuclear power development is at slower pace, which was introduced, in late sixties. The concept of operating power systems on a regional basis crossing the political boundaries of states was introduced in the early sixties. In spite of the overall development that has taken place, the power supply industry has been under constant pressure to bridge the gap between supply and demand.

Growth of Indian power sector

Power development is the key to the economic development. The power Sector has been receiving adequate priority ever since the process of planned development began in 1950. The Power Sector has been getting 18-20% of the total Public Sector outlay in initial plan periods. Remarkable growth and progress have led to extensive use of electricity in all the sectors of economy in the successive five years plans. Over the years (since 1950) the installed capacity of Power Plants (Utilities) has increased to 89090 MW (31.3.98) from meagre 1713 MW in 1950, registering a 52d fold increase in 48 years. Similarly, the electricity generation increased from about 5.1 billion units to 420 Billion units – 82 fold increase. The per capita consumption of electricity in the country also increased from 15 kWh in 1950 to about 338 kWh in 1997-98, which is about 23 times. In the field of Rural Electrification and pump set energisation, country has made a tremendous progress. About 85% of the villages have been electrified except far-flung areas in North Eastern states, where it is difficult to extend the grid supply.

The Indian power sector offers enormous investment opportunities:

Foreign Investment:

• 100 per cent FDI is allowed in all segments of power sector including trading
• No discrimination between domestic or foreign investors

Fiscal incentives:

• Zero customs duty on import of capital goods for Mega Power Projects
•  Income tax holiday for generating plants for 10 years

Progress:

• Public sector investment also stepped up to supplement the private sector
• 40,000 MW of generation capacity already under execution and USD 43 bn already committed
• Financial closure of 4400 MW capacity in generation projects in private sector
• Financial Closure of another 2200 MW is in advanced stage
• Another 10000 MW being appraised by Financial Institutions

Keeping all this in mind Power Finance Corporation also wanted to expand itself and the best way they found out by acquiring stakes in companies esp. new companies and this moves tells the same.

Tell me more on power sector. What are your vies and what do you think where this sector will move. I will wait for your replys.