Banks and financial institutions lending to the power sector have raised concerns over the delay in the disposal of petitions by the central electricity regulator and the tribunal, saying that it has resulted in revenue shortfall for the developers, which, in turn, has impacted their ability to service debt.
In a meeting with power minister Piyush Goyal on stressed assets in the sector earlier this month, the lenders including the State Bank of India, IDBI, Axis Bank and ICICI Bank pointed out the role of the Central Electricity Regulatory Authority (CERC) and the Appellate Tribunal for Electricity (Aptel) in causing inordinate delays faced by developers even in routine matters.
The banks, in their exposure to the power sector, are facing non-performing assets (NPAs) to the tune of nearly R3 lakh crore and believe that further delay could push more projects into the NPA category.
According to industry estimates, nearly 800 petitions are pending before CERC, which includes 35 petitions filed in 2012 or earlier. Of the pending petitions, 100 are from 2013 and 500 from 2014; the rest have been filed this year. While CERC has issued orders on 130 petitions bewteen July 2014 and July 2015, the rate of incoming petitions far outstrip the rate of disposal. It is estimated that nearly 300 new petitions are filed before the commission every year.
“Orders from CERC are not the final orders and the same are typically challenged by the aggrieved party in Aptel and eventually in the Supreme Court,” a source told FE. He added that till CERC disposes of a petition, a developer can’t expect any support from any party including the lenders.
As FE had reported earlier, Aptel is suffering from a severe manpower crunch with the unavailability of either of the two technical members. This could result in the loss of nearly 45 days of court time as new dates for hearing are being allotted in the second half of August. The quasi-judicial body can’t resume hearing petitions unless there is at least one technical member on the bench. The tribunal suffers from a backlog of nearly 300 pending petition.
Most of the private sector petitions deal with increase in tariff due to reasons that include changes in law, force majeure, increased cost due to inadequate fuel supplies, unforeseen increase interest rates and adverse rupee depreciation. The viability of such projects depend on the outcome of their petitions any delay forces them to languish.
The delay faced by petitioners is reflected in the compensatory tariff petitions filed before CERC by Tata Power and Adani Power nearly three years ago. A final decision is still awaited on the matter which is now with Aptel. The tribunal will hear the matter afresh after a technical member, part of hearings earlier, superannuated.
“One of the options to reduce the pendency of cases in CERC is that, like Aptel, the regulator be allowed to form benches. Routine matters can be posed to the bench comprising two members and critical matters can be heard by full bench comprising all the members,” the source said.