The government is considering setting up a special purpose vehicle (SPV), on the lines of Oil and Natural Gas Corporation Videsh Limited (OVL), to acquire coal and other mineral assets abroad.

At a recent meeting held in the Prime Minister’s Office, Economic Affairs Secretary Arvind Mayaram said the only way to find funds was by creating an SPV which could issue bonds for subscription by public sector undertakings (PSUs) with cash surpluses for entities like Coal India Limited . “It may be more productive to create an SPV on the lines of OVL to acquire coal fields abroad,” Mr. Mayaram told the meeting, which was chaired by Principal Secretary to the Prime Minister Pulok Chatterjee.

However, Mr. Mayaram cautioned that the total quantum of foreign exchange that could be made available would have to be carefully examined to ensure that it did not create imbalances in India’s forex management framework. The Finance Ministry will hold discussions with the Coal and Fertilizer Ministries on the issue.

The PMO had asked the Department of Economic Affairs to work out an institutional mechanism for pooling the surplus cash of central public sector undertakings (CPSUs) to make acquisitions abroad. The decision to work out this mechanism came after the realisation that the current reserve position does not allow the Government to have a sovereign wealth fund (SWF) to acquire assets.

However, the Petroleum and Natural Gas Ministry has been pressing for creation of a SWF to acquire assets abroad as most of these investments pay off in the long-run apart from giving a certain price advantage to the country.

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