As power sector reels under bad loans, govt weighs solutions to woes

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Published: February 26, 2019 5:22:47 AM

Power producers have been pitching for a relief from the RBI’s February 2018 circular, asserting that the stress in the sector is caused by factors beyond their control.

The GoM is learnt to have discussed external factors —including irregular payments from distribution companies.

A group of ministers (GoM) on power under finance minister Arun Jaitley met on Monday to seek ways to resolve the bad loan crisis in the sector. The GoM is learnt to have discussed external factors —including irregular payments from distribution companies, shortage in fuel supplies and regulators delay in raising power tariffs — that have led to the stress in the sector, and work out certain solutions, said a source.

Railways and coal minister Piyush Goyal and power minister RK Singh attended the meeting along with top bureaucrats of these ministries.

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Power producers have been pitching for a relief from the RBI’s February 2018 circular, asserting that the stress in the sector is caused by factors beyond their control. The circular stipulates a one-day default rule on term loans, which mandates treating a borrower who misses repayments as a defaulter the very next day. It requires banks to finalise a resolution plan in case of a default on large accounts of Rs 2,000 crore or more within 180 days (irrespective of sectors), failing which insolvency proceedings will have to be invoked against the defaulter.

According to an industry estimate, promoters of most among the 34 identified stressed power projects could lose ownership. A large chunk of the 34 projects — with a combined capacity of about 39 gigawatts and banks’ exposure of Rs 1.75 lakh crore — would now take the insolvency route.

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In its report after consultations with stakeholders, the finance ministry last year said the RBI’s “one-size-fits-all approach” under the circular might not be the most suitable response to deal with stressed assets in the power sector. For its part, the RBI has stuck to its ground and refused to give any special relief to the power sector from its circular, partly due to apprehension that any such move could spur demand for similar relief from other sectors.

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