NEW DELHI: Stressed power assets have got a major boost as the power ministry has strongly recommended substantial changes to the RBI’s controversial February 12 circular on loan defaults that industry says will send capacity of 30,000 MW into liquidation, while the coal ministry has assured higher fuel supply to thermal plants with the help of auctions.The power ministry has told the banking secretary that the sector’s stressed projects should not be categorised as stressed in 90 days, while the deadline of 180 days to resolve a bad loan, after which liquidation process is immediately triggered, should be extended to 270 days, a government official told ET.
“The power ministry is also likely to write to the state distribution utilities asking them to clear about Rs 14,000 crore dues to electricity generating stations," he said. The banking secretary had called a meeting of all stakeholders including private developers, lenders, RBI and officials from the ministries of finance, power, coal and oil, after which they were asked to give their submissions this week.
In last week’s meeting, the RBI’s representative stuck to the central bank’s stand and defended the circular, but others were more sympathetic.
The RBI’s circular had faced opposition from sections of the government and alarmed companies, many of which attribute the problems of stressed assets to circumstances beyond their control. These include regulatory delays, problems in land acquisition and green clearances and difficulties in dealing with financially weak state distribution companies which buy all the power generated by the plants.
Association of Power Producers (APP) argued that the RBI circular incentivises banks to consider change in ownership of a company instead of considering restructuring of loan, and will trigger liquidation of 30,000 megawatts of assets. It said this would lead to huge value erosion as five power plants that were taken to the bankruptcy court for resolution but did not find any takers, The association demanded reinstatement of the provisions relating to upgradation of stressed assets after loan restructuring.
APP said RBI’s circular disincentivises future investments in the power sector by private developers, who have built assets and are being penalised for reasons beyond their control.
The most stringent change in the framework is that the project gets categorised as stressed if there is a single day's default and all the lenders have to agree upon a resolution that has to be reached in 180 days.
“It is very difficult for APP to suggest timelines that would be required for ‘easing the stress’ as power being completely regulated sector,” the association said.