The government is planning to resolve the power sector projects through special rehabilitation programmes
Parliamentary Standing Committee on Finance will meet the bank chiefs today for a feeback on power sector issues with particular reference to the thermal power sector. The government is planning to resolve the power sector projects through special rehabilitation programmes. Many of the thermal power plants have cost overruns as coal licences got cancelled by the Supreme court. In cases where there was power generation, evacuation of power became a major bottleneck due to sagging demand and plummeting prices.
A senior banker who is attending the meeting said, "We will be presenting the power sector issues and also the possible solutions. The panel as asked details about the large NPAs, issues surrounding PPAs and discoms."
With the August deadline given by Reserve Bank of India (RBI) to resolve all the bad debt approaching, banks are trying to save the better assets from liquidation. The power assets are insulated from this ruling after the court ruling exempted them from being liquidated.
Parliamentary Standing Committee on Finance is preparing a note on the way forward for resolution of non-performing assets (NPAs) which will be submitted to the finance ministry. The panel is getting a feedback and its conclusion will be important for the government in formulating strategies for NPA resolution.
Banks have been demanding that power sector loans be taken off their books and held in a special fund where it can be resolved by selling off the sustainable debt. With the Allahabad High Court ruling that power assets should be exempted from liquidation under the National Company Law Tribunal, banks feel that many of the assets can be revived if there are long-term power purchase agreements.
For faster distribution of power the central government is also planning on setting up a National Power Distribution Company (NPDC) to streamline the ailing power distribution network in the country to replace the cash-starved distribution companies owned by the state governments.
Girish Kumar Kadam, sector head and vice-president, Icra, said, "The estimate of the stressed thermal capacity is about 60,0000 megawatt with a stressed loans of Rs 3 lakh crore. The main issue is the lack of long-term PPAs, uncertainty of domestic gas availability, significant cost overruns and unviable tariffs. We have estimated that haircuts banks may have to take on these accounts are as high as 20% to 70%."
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