In its preliminary assessment report submitted to Power Grid on November 3, the ICICI has stated that the sale of Power Grid assets to private sector will not only affect the finances of the company but also have an serious impact on its diversification plans such as its telecommunication business.

Significantly, an internal assessment carried out by Power Grid reveals the impact of sale of Rs 3,000 crore worth of transmission lines, primarily in the western, southern and northern regions. The assessment indicates, "a resultant estimated loss of about Rs 680 crore of revenue, about Rs 210 crore reduction in profitability and about reduction in net cash accruals of about Rs 470 crore each year".

Even, the ICICI in its report, which has also been discussed with the power ministry, clearly says that following the sale of its assets to the private sector, the revenue from these assets would not come to Power Grid and would reduce the internal cash generation. Moreover, the depreciation benefits available for the assets would be lost.

"These two factors are likely to impact adversely the investment plans of Power Grid. In view of this, the government may need to enhance the support to Power Grid in subsequent years," says the report.

Further, as per the report, in case profitable lines in operation are offered for sale in order to maximise disinvestment proceeds, the less remunerative lines would adversely impact the revenue and profitability of Power Grid. Thus the government would need to review the disinvestment vis-a-vis the role of Power Grid as a central transmission utility (CTU).

Senior ministry officials revealed that Power Grid has already identified three to four transmission lines which can be sold to the private sector.

These includes the western and southern region lines besides the Rihand-Dadri lines. It is proposed to sell these transmission lines through international competitive bidding and the funds generated from the sale of these lines would be used for future investments by the company.

It is significant to point out here that at a time when Power Grid has planned huge investments in the Ninth and Tenth Plan periods, selling off of its assets may prove harmful. Even ICICI has mentioned in its report that the present loans and future investments largely depend on the internal funds generation and the loans from the domestic and foreign lenders.

Meanwhile, there seems to be a internal resentment within Power Grid to selling off these transmission lines which are the biggest revenue earning sources of the company.

A senior Power Grid official, on the condition of anonymity, said that the proposal to sell some of the company's transmission lines at this stage will seriously affect the future fund raising programme of the company.

"The bankers and financial institutions which were earlier ready to forward funds for various projects without any guarantee have now indicated that this move of selling some of the company's biggest assets may create problems towards raising funds by the company," he added.