New Delhi: Private Power producers have pleaded with the Supreme Court that the February 12 circular of the RBI will further accentuate the already existing grave problems afflicting the health of the sector while challenging the validity of the central bank’s order. Several power companies, Association of Power Producers (APP), Independent Power Producers Association of India (IIPAI) had challenged the validity of the Reserve Bank of India’s February circular in various high courts seeking a stay on insolvency proceedings.
Power companies have argued that the circular would push even those power assets that were close to achieving loan restructuring in to insolvency. In their arguments while challenging the circular, the APP said: “Ministry of Power’s admission that Non-payment of dues (Rs 40,846 crores) and delay in recovery of amounts from Discoms, majority of which are government-owned impairs the ability of Independent Power Producers (IPPs) to service debt in timely manner.
“HLEC (The High-Level Empowered Committee of the Power Ministry) Report also notes that delay in payments by Discoms is a major stress factor.” The APP states this to force its stand against the RBI circular that mandates a strict 180-day timeline over which the banks are required to unanimously agree on the resolution plan, failing which the stressed account would have to be referred to for resolution under the Insolvency and Bankruptcy Code (IBC). Under the RBI framework, if a borrower defaults on repayment of interest with any one of the banks, all lenders are required to put together a resolution plan.
The APP in its petition is making a case as to why power producers fail to meet the loan repayment timeline and how the RBI circular would further push them into bankruptcy rather than help them repay the loans to the banks. But RBI has said 180 days is a reasonable period for achieving implementation of Resolution plan. The spokesperson of APP stated that if these dues are liquidated, not only will it enable power companies to service their debt on time but also enable smooth and efficient operation.