India's Economic Times reported that PFC, a public sector non-banking lender, has been holding talks with a number of potential partners for the venture - including Goldman Sachs and the Blackstone Group - which could be launched in Cyprus, the Isle of Man or Mauritius.

“PFC plans to launch the new fund in overseas tax havens like Mauritius, Cyprus or Isle of Man to get maximum tax benefits for the investors and encourage them to increase exposure to the power sector,” a power ministry official was quoted as announcing.

The official added that Mauritius is the domicile most favoured by the government.

According to Reuters, PFC has been in discussions with five or six companies, but wants to be the dominant partner, holding at least 25% of the fund. PFC is aiming to have a preliminary agreement signed in October.

The fund is intended to be a vehicle to raise finance for the building of new power plants in India, which has a shortage of electricity.

PFC was set up in July 1986 as a Financial Institution (FI) dedicated to Power Sector financing, and committed to the integrated development of the power and associated sectors. The Corporation was notified as a Public Financial Institution in 1990 under Companies Act, 1956. The Corporation has been registered as a Non Banking Financial Company by the Reserve Bank of India.