Power lines hang from transmission towers on Torrens Island, South Australia. (Photographer: Carla Gottgens/Bloomberg)

Panel To Look At Ways To Resolve Power Sector Stress

The government constituted a high-level empowered committee headed by the cabinet secretary to address the issues faced by stressed thermal power projects.

The panel will comprise officials from ministries of railways, finance, power and coal, and lenders having major exposure to the power sector, according to a Ministry of Power statement. It would look to maximise the efficiency of investment including changes required to be made in the fuel allocation policy, regulatory framework, mechanisms to facilitate sale of power, ensure timely payments.

The panel will also consider if changes are required in the provisioning norms, Insolvency and Bankruptcy Code, asset restructuring company regulations and any other measures proposed for revival of stressed assets to avoid investments from turning bad, the statement said.

Also read: Finance Ministry Suggests Forming Panel To Tackle Stressed Power Assets

It follows a report by the Department of Financial Services that suggested setting up an empowered panel, besides giving operating plants not facing insolvency action yet six months more months to resolve issues. The report came after the Allahabad High Court on June 1 ordered that no action be taken against power producers till they are heard.

The generation companies had challenged the Reserve Bank of India’s Feb. 12 circular that laid down stricter timelines for initiating insolvency proceedings. It also mandated that banks classify even a one-day delay in debt servicing as default. For accounts with an exposure of Rs 2,000 crore or more, banks will have to ensure that a resolution plan is in place within 180 days after a ‘default’.

Private power producers feared that the RBI’s new regulations would push projects with a capacity of about 60,000-70,000 megawatts towards bankruptcy and sought more time. The central bank, according to submissions mentioned in the report, is not in favour of giving more time.