DNA Money Edit: Light at the end of tunnel for power companies

Stressed electricity generating companies are finally at ease. After the Reserve Bank of India (RBI) issued a circular on February 12 asking banks to scrap all debt restructuring mechanisms and begin the resolution process if a company delayed payment even by a day, there was hue and cry from the power sector. Many believed that the regulator’s zero tolerance towards even a day’s delay in loan repayment would seriously jeopardise lending to the infrastructure sector.

The government has found a way out. The power ministry is planning to house thermal power plants with a debt of Rs 2 lakh crore in a special National Infrastructure Investment Fund, which will be assisted by an asset management company. As DNA Money reported, SBI Caps will steer the rehabilitation project in consultation with the banks while NTPC may be roped in to run the plants until they are turned around and sold to investors.

The power projects are all very long-term infrastructure investments and the sector works differently with its dependence on the government. There are 40,000 MW of stressed power projects across 34 projects with an outstanding debt of Rs 1.8 lakh crore. The outlook for the sector remains largely negative.

It is important to save the sector from the abyss if India wants to pace up the economic growth.