The India Power Fund, being set up to finance equity in power sector projects, will be modelled as a venture capital fund with a corpus of around Rs 20,000 crore (Rs 200 billion).

The fund would be set up by 2012, with an initial corpus of about Rs 500 crore (Rs 5 billion) to be contributed by the Power Finance Corporation and other public sector undertakings, R Krishnamoorthy, director (finance) of PFC said in New Delhi on Friday.

The fund, to be managed independently, would pick up equity in the power sector -- both in private as well as public sector projects.

"PFC held discussions with the market regulator, Securities Exchange Board of India, in this regard and decided to set up a venture capital fund, as the setting up of a mutual fund would have taken a longer time," Krishnamoorthy said.

SBI Caps, which is advising PFC on the modalities of the fund, had suggested various options for setting up the fund -- as a mutual fund, a special purpose vehicle or an infrastructure fund.

According to the estimates of fund requirement in the power sector till 2012, SBI Caps said about Rs 50,000 crore (Rs 500 billion) would be required in the current and the next Five-Year Plans.

Keeping in mind the proposed investments in the power sector in the next decade, PFC is planning to set up the IPF with an initial corpus in the range of Rs 5,000 crore (Rs 50 billion) to Rs 20,000 crore (Rs 200 billion) to make up for a shortfall of up to 25 per cent of equity in a particular project.

PFC has also approached the Reserve Bank of India for raising $100 million through a syndicated loan, the chairman and managing director of PFC, A A Khan, told reporters in New Delhi, adding that the loan agreement for the second tranche from the Asian Development Bank was likely to be signed shortly.

The corporation has already crossed its target of Rs 10,500 crore (Rs 105 billion) for the fiscal, sanctioning loans worth Rs 11,478 crore (Rs 114.78 billion) in the first half of the year itself.

It has disbursed Rs 3,878 crore (Rs 38.78 billion) so far. The company, which is offering loan facilities to the private sector also, sanctioned a total of Rs 202 crore (Rs 2.02 billion) to five private companies.