India Power Fund — a power sector venture capital fund to be promoted by Power Finance Corporation (PFC) — has remained a non-starter even after two years of its announcement. Meanwhile, a number of private equity funds are gearing up to grab a slice of the estimated $100-billion (Rs 4,50,000 crore) investment pie for the power sector in the Eleventh Five-Year Plan. Investments are required for generation of 68,000 megawatt additional power and expansion in the transmission and distribution segments.
In February 2004, the power ministry said India Power Fund would be formed under the aegis of PFC to meet the shortfall of equity needs for the power sector. PFC, with an initial commitment of Rs 200 crore, would promote and incorporate India Power Fund Asset Management Company Ltd to manage the fund. India Power Fund would pick up minor stakes between 5 and 10 per cent in each power projects.
But PFC has failed to get any firm partnership commitment from banks and other financial institutions, except the Life Insurance Corporation of India, for the venture. “As of now, we have got confirmation from LIC. We are in talks with some public sector banks and financial institutions and we expect to float the fund by March this year with an initial corpus of Rs 1,000 crore,” said Shyam Wadhera, director (projects), PFC.
He, however, declined to reveal the amount LIC has committed towards the fund. Oriental Bank of Commerce has committed Rs 10 crore for the fund.
Though PFC is eager to rope in NTPC and other public-sector power generators and power finance companies in the venture, their participation in the power fund would require cabinet approval.
Without enough commitment in place, PFC has not been able to form the asset management company so far. Moreover, PFC will have to register the company with Sebi.
Infrastructure Leasing & Financial Services has firmed up its plan to float a $1-billion (Rs 4,500 crore) private equity fund in partnership with Abu Dhabi National Energy Company. The fund is likely to be launched before the end of the current financial year.
Blackstone Group LP and Citigroup Inc are also in talks with the government to float a $5-billion (Rs 22,500 crore) fund to invest in infrastructure projects, particularly in the power sector.
Reliance Capital, in partnership with Temasek Holding, has formed a $200-million private equity fund and picked up stakes in some power equipment manufacturing companies.