NHPC IPO illogical; borrowing better option to raise funds: CITU

The Centre of Indian Trade Unions (CITU) has criticised the government for selling 10 per cent equity shares of NHPC through an initial public offering (IPO) saying the money company raised through the IPO could have been mobilised through borrowings.     

"CITU denounces the decision of the government to offload 10 per cent equity shares of NHPC for Rs 6,037 crore of which Rs 4,000 crore is reportedly planned for project operations of NHPC and remaining Rs 2,000 crore (would go to) government," it said in a press statement.  

"This is economically illogical as Rs 4,000 crore fund for project operation could have been easily mobilised by NHPC through its reserve and surplus as well as through borrowing from banks/FI," it said.     

According to CITU, NHPC's reserves and surplus have gone up to Rs 6,798 crore in 2008-09 from Rs 4,709 crore in 2005- 06.     

"Apart from this healthy reserve position, after paying Rs 300 crore as dividend to the government in 2007-08, NHPC's debt is only 63 per cent of its equity whereas the private sector power companies are being allowed by the government to borrow four times their equity," it said.   

CITU alleged the objective of pro-corporate investor friendly government is "ostensibly to allow private investors to tap the debt market mostly public sector banks and FIs while selling public assets in form of government equity in PSUs."