The key to global competitiveness and growth of Indian economy lies in the creation of a strong energy security set-up backed by high-class power infrastructure. Of the $500 billion investment in infrastructure, power will require one-third of that share. With power woes continuing in the XI Plan and huge investments required in the power sector in the XII Plan, the demand for power will continue to grow. Power Finance Corporation (PFC) has drawn up a road map to capitalise on these advantages and turn the challenges of XII Plan into opportunities. PFC Chairman and Managing Director Satnam Singh talks to Sujay Mehdudia about the ambitious plans of the company.
Your views on the current outlook of the power sector in India and the likely scenario?
Power sector at this point of time is undergoing crucial changes in terms of huge capacity addition, higher efficiency, increased private participation, competitive pricing and improved regulatory framework. Power requirement in India is expected to grow manifold in the coming years as a result of industrial and urban expansion. It is expected that about 52,000 MW will be added by the end of the XI Plan, leading to almost two-and-a-half times that of the X Plan. In addition, 16 ultra mega power projects (UMPPs) have been identified out of which four UMPPs have already been awarded.
This initiative will immensely contribute to achieving the targeted capacity addition of 93,000 MW in the XII Plan (including 12,000 MW slippages from the XI Plan). Development of mega transmission systems through private sector participation has also been initiated. Eleven such independent transmission projects (ITPs) have been identified by the Empowered Committee of which six ITPs have already been awarded.
Looking into huge potential in the power sector, how do you see PFC placed to take advantage of this and make the best of the given opportunities?
The total fund requirement to achieve the XI Plan target was estimated at Rs.10,31,600 crore. A tentative capacity addition of about 1,00,000 MW has been envisaged for the XII Plan. The total fund requirement to achieve the above targeted capacity addition is estimated at Rs.11,00,000 crore. Thus, total investment in the power sector during the XI and XII Plans is likely to be around Rs.21,31,600 crore. This huge fund requirement is a clear indication of the opportunities available for PFC in the coming years. PFC is playing a key role in various government programmes for the power sector, including acting as the nodal agency for the UMPP programme and the Restructured Accelerated Power Development and Reforms Programme (R-APDRP).
Could you throw some light on the 2012-13 fiscal plans?
During the 2012-13 fiscal, PFC aims to raise Rs. 40,000 crore. We are also scouting for a partner for our subsidiary PFC Consulting's global foray. The company had set a target of raising Rs.30,000 crore this fiscal.
It has raised Rs.28,000 crore so far. PFC has set a target of disbursing Rs.35,000 crore during 2011-12. Out of which Rs.25,400 crore has been doled out. It plans to up the disbursal target to Rs.40,000 crore in 2012-13. The corporation would disburse the Rs.10,000-crore loan signed with state-owned NTPC by the end of this fiscal. This loan agreement was signed in 2008-09.
It has so far disbursed Rs.8,000 crore. The company was also looking at partnering an international company for taking up consultancy assignments in the Asian region.
Can you elaborate on PFC's contribution in the renewable energy segment through PFC Green Energy Limited?
PFC believes that the renewable energy space in India provides significant untapped potential. To tap this opportunity, the renewable business group of PFC was converted into PFC Green Energy Limited as a wholly-owned subsidiary of the company. This company will exclusively extend finance and financial services to promote green (renewable and non-conventional) sources of energy with an authorised capital of Rs. 1,200 crore and subscribed share capital of Rs.5 lakh crore. The company received its certificate of commencement of business on July 30, 2011. To tap the renewable energy business in the state and private sectors, the corporation has given thrust to renewable energy and clean development mechanism (CDM). During 2010-11, loans amounting to Rs. 974 crore were sanctioned to support a capacity of 202 MW for solar and biomass generation projects in the state and private sectors.
What kind of strategy is being adopted by PFC for sustainable growth in future?
As a part of the sustainable strategy to expand business, Power Finance Corporation intends to float independent business verticals in the form of subsidiaries. As we already have three subsidiaries — PFC Green Energy Ltd, PFC Consulting Ltd and PFC Capital Advisory Services Ltd — in place which have developed expertise in their respective niche areas of business to tap the significant business potential. The other business groups in our company will adopt a similar approach of spinning off into independent subsidiaries as they grow and develop expertise in such areas. The future strategy, therefore, is to sustain the growth momentum of our company by further consolidation in power sector and strengthening of these business verticals so as to enable them grow into strong companies with sound financials.
Due to economic slowdown, realisation has become a point of concern. How is PFC tackling the issue?
Our company gives highest priority to the realisation of its dues towards principal and interest. Out of Rs.21,491.54 crore to be recovered towards principal and interest under rupee term loans, bill discounting, working capital, lease financing, foreign currency loan, loans for equipment financing and guarantee fee, an amount of Rs.21,417.86 crore was actually realised. This works out to an overall recovery rate of 99.66 per cent during 2010-11 (previous year 99.63 per cent). The overall recovery rate has been consistently maintained at 96-99 per cent for the last ten years. The company has achieved a recovery rate of 99.81 per cent in respect of principal amount due during 2010-11. The company has made a total provision amounting to Rs. 36.06 crore for non-performing assets (NPAs) against loan assets in its annual accounts up to 2010-11. After making provision for NPAs, the level of net NPA has been recorded at Rs.194.60 crore, forming 0.20 per cent of the total loan assets as on March 31, 2011.
What steps are being taken to tap the potential in backward integration initiatives by various companies?
Power Finance Corporation has created this business group to tap opportunities in allied sectors such as power equipment, gas transportation and coal mining which have a backward linkage to power sector.
The group has already started its business by financing large project for its expansion of power equipment manufacturing / production facilities. PFC is expanding this business with several funding proposals on hand to finance power equipment manufacturing facilities such as the solar photovoltaic (PV) facilities.