The Union Budget 2026-27 announcement regarding the restructuring of Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) has sparked significant apprehension among power sector stakeholders. Experts, engineers, and consumer advocacy groups fear this move could potentially undermine robust public institutions and create pathways for increased privatization in the financial infrastructure of India's power sector.
Finance Minister's Rationale Meets Skepticism
While Union Finance Minister Nirmala Sitharaman stated that the restructuring aims to strengthen public sector financial institutions, critics argue the Budget proposal lacks necessary clarity. More importantly, they contend it overlooks urgent and pressing challenges currently facing the power sector across the nation.
Questioning the Need for Restructuring Profitable Entities
Avadhesh Kumar Verma, a member of the Central Electricity Regulatory Commission (CERC) advisory committee and chairperson of the Uttar Pradesh Rajya Vidyut Upbhokta Parishad (UPRVUP), has openly questioned the logic behind restructuring two financially strong institutions. He highlighted that REC's net profit grew by nearly 10% to reach Rs 44,781 crore, while PFC also demonstrated robust financial growth in the recent fiscal period.
"When both institutions are demonstrably strong and profitable, what is the fundamental need for this restructuring?" Verma asked. He expressed a warning that influential private business groups could be behind this move, seeking to penetrate and gain control over public financial infrastructure that has traditionally supported the power sector.
Examining the Financial Performance
A closer look at the financials reveals REC's net profit increased from Rs 40,805 crore to Rs 44,781 crore in the last financial year. Furthermore, its post-tax profit for the first nine months of the 2025-26 fiscal year stood at a substantial Rs 12,920 crore. Similarly, PFC's profit showed healthy growth, rising from Rs 7,182 crore to Rs 8,981 crore. Given these strong performance indicators, Verma and other experts are urging the government to provide a clear and detailed explanation of its intent behind restructuring such profitable entities.
Fears of Private Sector Encroachment
The Uttar Pradesh Rajya Vidyut Upbhokta Parishad has voiced a specific suspicion that major private conglomerates may be actively seeking entry into public financial institutions. This concern draws parallels to previous efforts by private entities to gain stakes in electricity infrastructure through legislative changes like the Electricity Amendment Act. The consumer body has issued a strong call for complete transparency from the government to safeguard the long-term interests of electricity consumers across the country.
Broader Sectoral Concerns Unaddressed
Shailendra Dubey, chairman of the All-India Power Engineers Federation (AIPEF), pointed out that the Union Budget 2026-27 failed to address several critical issues. These include the mounting losses of power distribution companies (discoms) and the ongoing privatization of the transmission sector under Tariff Based Competitive Bidding (TBCB) norms. Dubey warned that restructuring REC and PFC without explicit clarity and safeguards could lead to problematic outcomes.
"This restructuring, if not handled with absolute transparency, could result in conditional financing for power projects and covert forms of privatization," Dubey cautioned. He emphasized that such a move would likely face strong opposition from power engineers and employees nationwide, who are committed to protecting public sector interests in this vital infrastructure domain.
The announcement has undoubtedly ignited a crucial debate about the future direction of India's power sector financing, balancing efficiency with the foundational role of public institutions.
