Union Cabinet of Economic Affairs, headed by PM Modi, has cleared the Rs 14,000 crore takeover of Rural Electric Corporation (REC) by Power Finance Corporation (PFC) on Thursday (6 December 2018), as reported by Economic Times (ET).
Both the entities are state-run PSUs (Public Sector Units) under the Union Ministry of Power, and while PFC is the financial backbone of India’s power sector, REC is a significant player in the rural electrification space.
“(The Cabinet) has given its ‘In Principle’ approval for strategic sale of the Government of India’s existing 52.63 per cent of total paid-up equity shareholding in Rural Electrification Corporation (REC) to Power Finance Corporation (PFC) along with transfer of management control,” a press release statement by the government noted.
This merger is part of NDA government’s broader objective of raising around Rs 20,000 crore by selling government stakes in such PSUs to other larger government-controlled companies. Apart from the REC-PFC merger, govt will also sell its stake in SJVN Ltd to NTPC (National Thermal Power Corporation).
“The acquisition intends to achieve integration across the Power Chain, obtain better synergies, create economies of scale and have enhanced capability to support energy access and energy efficiency by improved capability to finance power sector,” the statement added.
Also Read: Why PFC’s Acquisition of REC Is A Bad Idea