Power Producers’ Plea: High Court Gives Finance Ministry Two Weeks To File Report
The Allahabad High Court today adjourned the hearing on a petition filed by power producers against the Reserve Bank of India’s fresh stressed asset framework, giving the finance ministry two weeks to file its reply on the solution being worked out with the central bank.
Senior Counsel S Powaiyya, representing the power producers, pressed for interim relief, an official who was present at the hearing told BloombergQuint requesting anonymity. The RBI’s counsel opposed saying that under its Feb. 12 circular, coercive action will begin only after 180-day lapse and there was no need for any interim relief, the official said.
Solicitor General of India Ranjit Singh, who appeared for the central government, sought 15 days to file the final report. The court, saying that it has given power producers the option to approach the court in case of any coercive action, fixed the next hearing on Aug. 2.
The Allahabad High Court had ordered in June that no action be taken against the power companies on the basis of the central bank’s new stressed assets framework till the Finance Ministry hears their contention.
The Reserve Bank of India, in its Feb. 12 circular, laid down strict timelines over which insolvency proceedings must be initiated. The banking regulator 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’.
The new norms on non-performing stressed assets may push power projects with a capacity of about 60,000-70,000 megawatts towards bankruptcy, the Association of Power Producers had said.
In their petition, the association had said the circular resulted in withdrawal of earlier measures on as corporate and strategic debt restructuring — irrespective of stage — for different accounts. It’s “unrealistic and will ultimately impact genuine defaulters or entrepreneur from further investment”, the petition said.