Addressing the Economic Editors' conference here today Kumaramangalam said that the proposal was presently being considered by the government and soon a cabinet note on the acquisition of entire government equity in NHPC by NTPC would be readied to seek the Cabinet's approval.

The minister pointed out that NTPC had reserves of Rs 12,000 crore, which could be used for harnessing hydel power where investments had been hard to come-by.

Rs 4,500 crore from NTPC's reserves were thus being planned to be used to fund this acquisition. The amount would go to the Consolidated Fund of India in two tranches - the first tranche of Rs 2,500 crore is likely to be released during the current fiscal year, while the remaining Rs 2,000 crore during the next year.

Kumaramangalam refuted questionsby mediapersons that this amount would be used to meet the fiscal deficit of the government. He said that the sector did not require these funds over the next two years during which period it would remain in the Consolidated Fund. After two years, when the power sector needs this money, the government is likely to plough it back into the sector.

The minister also clarified that this was not a merger, he said that the management control of NHPC would not be affected due to the proposed buy-out by NTPC.

Kumaramangalam said government would soon be announcing a series of steps for consolidation of central power utilities that would not only help meet the power target but also synergise long-term requirements of the sector.

Government was also planning to create a special purpose vehicle (SPV) for securitising dues of various PSUs, create a joint venture Brahmaputhra Hydro Development Corporation with participation of all the PSUs for setting up a 21,000 mw hydel power project at Dehang and Subashi and alsosell some of the existing power projects of NTPC, he said.

ICICI has been appointed as the consultant to recommend various ways for restructuring the CPUs and they are likely to submit their report within six months, Kumaramangalam said.

NTPC, which has already decided to get into the hydel sector, is planning to set up a Rs 4,000 crore Koel dam hydro power project in Himachal Pradesh and the acquisition of NHPC would help the company use the technical expertise of the hydro company in executing the project, he said.

The financial strength of NTPC could also be used for better leveraging of its funds for taking up new hydel projects, Kumaramangalam said.