Power Ministry says no to REC privatisation

NEW DELHI: The Power Ministry has opposed any move to privatise Rural Electrification Corporation (REC) pending reforms in the sector.
The Ministry has communicated its views to the Disinvestment Commission which is currently finalising its recommendations on the PSU, official sources told PTI.
The opposition to the move comes as the ministry feels that inducting a strategic partner in REC at this juncture when reforms in the sector are incomplete would not yeild any benefit.
Government is currently in the process of introducing broadbased changes to the sector by way of Electricity Bill as well as encouraging reforms through unbundling of electricity boards and privatising distribution circles.
REC, which was set up in 1969 as Non-Bank Finance Company (NBFC), is currently involved in financing of rural electrification projects by way of giving loans to state electricity boards.
Sources said that government would not be in a position to maximise revenues by inducting a new partner as the power sector was in a precarious situation, ruling out the possibility of a lucrative bid.
The arguments of the ministry are in line with stragtegy adopted by it in case of another company namely Power Finance Corporation which is also under study by the commission.
The Power Ministry feels that loss making nature of the business would make REC unattractive for bidders at this juncture.
Besides, the Ministry is of the view that inducting a strategic partner may not help the company, particularly when technology and additional capital are not pressing issues as is the case with other PSUs.
REC, wholly owned by the government, was looking at the public offer route for raising capital.
The company registered a net profit of Rs 388 crore in 2001-02 while loans sanctioned went up to Rs 6764 crore and disbursements to Rs 4722 crore during the same period.
It was one of the two PSUs, along with NABARD, to be allowed to raise funds through the market by way of bonds with capital gains benefit under Sec 54 of IT Act.