The government will start investigating whether private developers exaggerated or 'gold plated' projects to increase their debt component as a part of measures taken to resolve stressed assets in power sector to reduce their equity contribution.
As a part of measures taken to resolve stressed assets in the power sector, the government will start investigating whether private developers exaggerated or 'gold plated' projects to increase their debt component and reduce their equity contribution, said Power Minister Raj Kumar Singh.
“There is a need to investigate it. While looking at stressed assets, we will also look at whether any over-invoicing etc. has happened,” Singh said.
A Livemint report stated that several private project developers who approached banks for funding to increase debt value were over-estimating their accounts and inflating capital expenditure by quoting higher values for ordered equipment.
The power sector in India is responsible for a large part of non-profit assets (NPAs) affecting the banking sector. The government had launched the vital Ujwal DISCOM Assurance Yojana (UDAY) scheme for financial and operational reform of power distribution companies (DISCOMs) in India last year to uplift states' financial position pulled down by discom debts.
“There was a committee here (in the ministry) along with the bankers to review the status. Shalini Prasad (additional secretary in the power ministry) was heading the committee…I believe that some more units can be revived. So, let us see,” Singh said.
According to the Economic Survey 2016-17 (Volume II) released in August, NPAs in electricity generation accounted for around 5.9 percent of the total outstanding advances of Rs 4.73 trillion.
The department of financial services reviewed over 34 coal-fuelled power projects, with an estimated debt of Rs 1.77 trillion, said the report. A paucity of funds, lack of power purchase agreements, and absence of fuel security were some of the issues faced by these projects.
“The focus is on starting the stranded assets which can be run. Some (around 8,000 megawatts) have been cleared from the list of 36,000 megawatts. More will get cleared. We have called a meeting on 29 November to review the status,” Singh said.
According to experts, the overall universe of stressed thermal power generation assets is 60 gigawatts (GW).
“The overall stressed thermal power generation assets in the private IPP (independent power producers) segment remain sizeable at 60 GW, comprising about 26 GW due to the absence of long-term power purchase agreements (PPA), about 12 GW of stranded capacity due to non-availability of domestic gas and 22 GW due to unviable tariffs in the PPAs due to capital cost escalation and fuel pricing issues for imported coal,” rating agency ICRA said in a report on Thursday.
The need to clear stressed assets is important considering the increased requirement of power under the recently-launched Saubhagya scheme to provide electricity connections to over 4 crore families in rural and urban areas by December 2018.
Also read: PM launches 'Saubhagya' scheme to provide power to all
The scheme will require an additional 28,000 MW of power, considering an average load of 1 kilowatt (kW) per household for eight hours a day. Currently, India’s per capita power consumption is around 1,200 kilowatt hour (kWh), according to the report.
