The launch of the India Power Fund, a venture capital fund for the power sector proposed to be set up by the Power Finance Corporation, has been delayed as the company does not have the required number of independent directors to clear the proposal.
PFC was to invest Rs 200 crore (Rs 2 billion) in the proposed Rs 1,000 crore (Rs 10 billion) fund. The board is, however, not empowered to do so, till it appoints six independent directors on its board, as per the latest guidelines issued by the Department of Public Enterprises.
"PFC is a mini-ratna company and as per the guidelines, needs to appoint these directors on its board in order to be able to exercise powers," said an official in the power ministry.
Once the directors are appointed, the company will be able to put in its Rs 200 crore contribution to the fund. After that, it will approach the registrar of companies to register the fund. The government has already cleared the memorandum of articles of association of the fund.
Approval for contribution from various sources including banks, PTC and PFC had been received. The fund was expected to start with a corpus of Rs 500 crore (Rs 5 billion) in August 2005. Banks too have got approval from their boards and formal clearance has been obtained from the Reserve Bank of India
he IPF was originally envisaged as a Rs 1,000 crore (Rs 10 billion) fund to meet the shortfall in the equity requirements in the power sector. The ability of existing utilities to raise resources for meeting the required equity investments is limited by the tariff policies adopted by various regulatory commissions. A significant contribution will, therefore, have to come by way of fresh investments from private promoters.
Keeping in mind all known and expected sources of equity, there is likely to be a shortfall of nearly Rs 70,000 crore (Rs 700 billion) with respect to the total equity requirement for implementing the ambitious capacity addition target of 100,000 mw by 2012.The fund was launched in February 2004 to meet 10 per cent of the shortfall of Rs 70,000 crore in equity requirement for the power sector till 2012.