POWER FIRMS UNLIKELY TO GET INSOLVENCY RELIEF
Centre to work on reform plan, industry seeks time
The Reserve Bank of India (RBI) is unlikely to soften its stand on stressed assets in the power sector,
which is seeking special dispensation under insolvency regulations. The Centre is likely to push for debt restructuring and reform schemes to resolve issues plaguing private power producers.After chairing a meeting with stakeholders in the power sector along with officials from the ministries of coal and power and a RBI representative, Department of Financial Services Secretary Rajiv Kumar said the RBI reiterated its February circular, which provided enough room for restructuring stressed power assets and no special dispensation was needed.
is The unlikely Reserve to Bank soften of its India stand (RBI) on stressed assets in the power sector, which is asking for a special dispensation under the Insolvency and Bankruptcy Code (IBC).
The Centre is likely to push for debt restructuring and reform schemes to resolve issues plaguing private power producers. After chairing a meeting with stakeholders in the power sector, along with officials of the ministries of coal and power and an RBI representative, Rajiv Kumar, secretary, Department of Financial Services, said the central bank had reiterated that its February circular provided enough room to restructure stressed power assets and no special dispensation was needed.
The RBI in February this year mandated banks to classify even one day’s delay in debt servicing as default. The notification mandates resolution proceedings against stressed accounts to be completed in 180 days. “The RBI said the circular did not not stop restructuring of stressed power assets even if there was a default, and restructuring is possible within the time frame,” Kumar told the media after the meeting.
The Union power ministry had earlier urged the RBI to provide extension to the sector after R K Singh, Minister of State for Power and New & Renewable Energy, had called the RBI resolution and for demanded bad loans changes. “impractical” Representatives of the power sector asked the government to consider the time frame needed for any reform plan for stressed assets. “The heavily regulated nature of the power sector and the fact that the present crisis is caused more by externalities, the power sector would need a differential resolution path. The relaxation s would provide a window for chalking out a timebound action plan required to salvage a significant portion of the power portfolio,” said A K
Khurana, director general, Association of Power Producers.
Currently, three plans are being worked out for resolving stress in the power sector.
State Bank of India (SBI), which has the highest exposure to the sector, is planning to select assets for its pilot scheme wherein it, along with a funding agency, will take over the debt, hire an operations and management company, and sell them later. SBI has shortlisted 11 power projects to which it has lent to start the process.
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