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Quashing Of RBI’s Feb. 12 Circular To Help Thermal Power Plants, Says Official

The order will help power plants which are under stress due to lack of power purchase agreements, says an official. 

Smoke rises from a chimney as electricity pylons stand at a thermal power station in India. Photographer: Dhiraj Singh/Bloomberg
Smoke rises from a chimney as electricity pylons stand at a thermal power station in India. Photographer: Dhiraj Singh/Bloomberg

The Supreme Court’s order to quash Reserve Bank of India’s Feb. 12 circular on defaulting companies will offer immediate relief to commissioned thermal power plants with up to 15,000 megawatt capacity, according to an official from the Ministry of Power.

The order will help power plants which are under stress due to lack of power purchase agreements, the official said seeking anonymity. Jhabua Power Ltd., Coastal Energen Pvt. Ltd., Essar Power’s Mahan plant and RattanIndia Nashik Power Ltd. are among the thermal power projects which were commissioned but do not have power purchase agreements.

Banks have more time to finish the resolution process, and there is scope under the inter-creditor agreement, he said, adding that the order gives us some space to revive these stressed projects. The government, he said, sees the possibility of forming an asset management company.

The RBI’s Feb. 12 circular laid down a rule-based stressed asset framework which asked banks to resolve bad loans in large accounts within 180 days or refer them for insolvency proceedings.

The Parliamentary Standing Committee on Energy had in 2017 identified 34 stressed power projects. The overall capacity of these projects stands at about 40,000 MW with a total outstanding debt of nearly Rs 1.75 lakh crore.

The Supreme Court had struck down the Reserve Bank of India’s Feb. 12 circular on the grounds that the regulator can give directions to banks on stressed assets only upon the central government’s authorisation and in case of a specific default. As per the court order, any proceedings that have been initiated under the circular have all been set aside.