Seeking to raise cheaper loans, state-run Power Finance Corporation (PFC), which is engaged in financing power generation and transmission projects, is planning to raise Rs. 5,000 crore this fiscal through a tax-free bond issue.

The Ministry of Finance's approval for the issuance of these bonds can be expected in a day or two, officials in the Power Ministry said. "We are awaiting the Finance Ministry's clearance to allow us to raise Rs. 5,000 crore through tax-free bonds in the current fiscal," the official remarked. PFC has set a target for borrowing Rs. 30,000 crore during the current financial year (2011-12).

The Power Ministry is of the view that it may bring down the borrowing cost for the company by about 1.5 per cent. For example, if the company was borrowing at an interest rate of 8.5 per cent, it would be able to get that loan at 7 per cent interest.

PFC has already come out with follow-on public offer that raked in over Rs. 3,400 crore. The government holds about an 84 per cent stake in PFC. PFC will utilise the proceeds of the FPO for meeting its lending and disbursement targets this fiscal (2011-12).

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