August 22, 2008

CCEA clears INR 8,000 crore FDI for Essar Power

It is reported that Indian government has approved a proposal by Essar Power Limited to infuse up to INR 8,000 crore as foreign equity in the company while permitting it to operate as the holding company. This decision, taken by the Cabinet Committee on Economic Affairs, would enable EPL to undertake various downstream projects, including power and coal mining.

Mr P Chidambaram union finance minister, after the CCEA meeting, said that "The approval will allow the Essar Power to invest in the permitted downstream activities, including investment in power sector and coal mining for captive consumption for power projects."

The proposal has already been cleared by the Foreign Investment Promotion Board. Since the investment inflows have exceeded INR 600 crore, as per Press Note 7 (1999 series), the proposal needed to be cleared by CCEA. In another decision, the CCEA approved a proposal by real estate major Rakindo Developers to set up a subsidiary with foreign direct investment up to USD 250 million.

Essar Global Limited is the holding company of EPHL and also holds diverse investments in India and other countries. At present, Essar Power Limited is the operating company of the Essar Group in the power sector. It owns and operates a 515 MW power plant at Hazira in Gujarat.

Essar Power has lined up plans to invest over INR 20,000 crore in the power sector in the next couple of years, although EPH would provide funds only for the equity stake. It also plans to increase its installed capacity to 6,000 MW by 2012, which includes power plants of 1,200 MW each in Madhya Pradesh, Gujarat and Jharkhand.