Full-Fledged Fi Status Sought For Power Finance Corp
The M Narasimham committee, instituted to examine a revamp of the financial operations of Power Finance Corp (PFC), has recommended that the corporation be converted into a full-fledged financial institution.
The committee has recommended that PFC, which functions as a non-banking financial company at present, should be given adequate autonomy to operate as a full-fledged FI.
This would enable PFC to face the rising competition in the financial markets, specially since the corporations present scope of operations requires it to compete with other FIs.
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The panel has sugggested that PFC should be taken out of the purview of the department of public enterprises (DPE) and should not be subjected to the dual control of the DPE and the RBI.
The committee has pointed out that PFC suffers from sectoral limitations as it only deals with the power sector. Therefore, it should be allowed to expand its operations to activities which have both forward and backward linkages like coal, mining as well as roads.
The committee has also said that both PFC and Infrastructure Development Finance Corp (IDFC) should synergise their activities in the power sector.
The committee has recommended an initial dilution of the governments stake in PFC from 100 per cent to 51 per cent. This, it has argued, will broadbase the equity holding.
The committee has suggested that PFC, which has an authorised capital of Rs 2,000 crore against a paid-up capital of Rs 1030.45 crore could allot additional equity to foreign and domestic institutions and also tap both the Indian and global markets.
Apart from entering direct equity participation, the committee has recommended that PFC could also add loan syndication, consortium lending, suppliers credit and joint ventures to its portfolio of operations.
As part of its future business strategy, the committee says PFC should identify new methods to securitise PFCs assets and should aim to become a global player by raising resources on its own strength and not depending on government support.
The prescription
l Reorientation of PFCs operations to make it a full-fledged FI
l Reduction of the governments stake from 100% to 51%
l Expansion of operations to coal, transport and mines
l Identification of new methods to securitise assets
l Equity participation in bankable power projects to promote long term investments
l Reorganisation of the guarantees business