REC to seek RBI nod for Pariwartan ARC
NEWDELHI:The government is proceeding with plans to start an asset reconstruction company (ARC) to warehouse stressed power projects and protect their value until demand for power recovers, said a top official.
As part of the plan to prevent their distress sale under the insolvency and bankruptcy code, state-run Rural Electrification Corp. Ltd (REC) will lead the process of applying to the Reserve Bank of India (RBI) for setting up the ARC tentatively named Power Asset Revival through Warehousing and Rehabilitation, or Pariwartan.
“We have initiated the process along with the stakeholders,” said PV Ramesh, chairman and managing director, REC. “Along with all power sector PSUs (public sector units) which are on board, there is also significant interest from the public sector and private sector banks.”
There have been concerns that stressed projects have drawn bids for around ₹35 lakh per megawatt (MW) under the Insolvency and Bankruptcy Code, a fraction of the ₹5 crore per MW needed to build them.
Mint reported on June 21 on the government’s plan to warehouse stressed power projects totalling 25,000 MW under an asset management firm. REC has identified projects with a total debt of around ₹1.8 lakh crore as part of the Pariwartan scheme.
The government has reviewed 34 coal-fuelled power projects, with an estimated debt of ₹1.77 lakh crore. The issues faced by these projects include paucity of funds, lack of power-purchase agreements and absence of fuel security.
India’s power sector has been one of the highly stressed sectors, with close to ₹1 lakh crore of loans having turned bad or been recast. Around 66 gigawatts (GW) of capacity is facing various degrees of financial stress.