The Centre has accorded ‘Maharatna’ status to the state-owned Power Finance Corporation Ltd (PFC), thus giving PFC greater operational and financial autonomy.
What is REC and PFC?
- REC – Rural Electrification Corporation is a Navratna Company functioning under the purview of the Ministry of Power.
- It takes the role of public Infrastructure Finance Company in India’s power sector and promotes rural electrification projects across India.
- The company provides loans to Central/ State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives, NGOs and Private Power Developers.
- PFC – Power Finance Corporation is an Indian financial institution.
- It comes under Navratna category and wholly owned by the Government of India.
- PFC is essentially a state-run non-banking financial company that focuses on power infrastructure, while REC is an implementation and finance company with a focus on generation.
What is “Maharatna” status?
- The Maharatna dispensation was instituted by the Union government in order to enable big Central Public Sector Enterprises (CPSEs) to grow into global giants (introduced in 2010).
- CPSEs are companies in which the Central Government or other CPSEs own 51 percent or more of the stock.
- A company is given “Maharatna” status if it has made a net profit of more than Rs. 5,000 crore for three years in a row, has an average annual turnover of Rs. 25,000 crore for three years, or has an average annual net value of Rs. 15,000 crore for three years. It should also have operations or footprints all over the world.
- A CPSE must be Navratna-certified and listed on an Indian stock exchange.
- The criteria for granting Maharatna, Navratna, and Miniratna designation to CPSEs have been established by the government.
About PFC Ltd.
- Power Finance Corporation Ltd. (PFC) is an Indian financial institution under the ownership of Ministry of Power.
- Established in 1986, it is the financial backbone of Indian Power Sector.
- PFC is the 8th highest profit making Central Public Sector Enterprise (CPSE) as per the Department of Public Enterprises Survey for FY 2017–18.
- It is India’s largest NBFC and also India’s largest infrastructure finance company.
Benefits of Maharatna Status
- This new status will enable PFC to offer competitive financing for the power sector, which will go a long way in making available affordable & reliable ‘Power For All 24×7’.
- This will also impart enhanced powers to the PFC Board while taking financial decisions.
- It can make equity investments to undertake financial joint ventures and wholly-owned subsidiaries and undertake mergers and acquisitions in India and abroad.
- It can also structure and implement schemes relating to personnel and Human Resource Management and Training.
- It can also enter into technology Joint Ventures or other strategic alliances among others.
- Given the state of the power sector, PFC has better use for any capital it can raise than to transfer it to the government.
- The government’s claim that the post-takeover entity will be able to raise capital more cheaply is questionable, as there are probabilities of down grade of rating for both PFC and REC.
- Thus the decision must be re-examined, and the regulators involved including the Competition Commission of India, Securities and Exchange Board of India.
- Apart from this Reserve Bank of India should demonstrate their independence in this matter.
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