NEW DELHI: Saddled with bad loans worth Rs 2.5 lakh crore, the fate of 34 power companies and about 50-odd power projects is on tenterhooks as the deadline for formulating resolution plans comes to an end on Monday. With no concrete roadmap from both the power and finance ministries, the sector’s fate rests on the mercy on banks.
“The power sector is in its worst phase. About 34 companies are feared to undergo bankruptcy proceedings, which will affect projects worth Rs 2.5 lakh crore,” a senior official from Power Finance Corporation said.
All these power projects have a combined capacity of 39 GW. The Reserve Bank of India’s February 12 circular on restructuring bad loans had mandated banks to take loan accounts, which remain unresolved for over 180 days, to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code. With the deadline ending on August 27, the banks will be required to push unresolved cases to NCLT benches for resolution.
The Supreme Court on August 8 refused the plea of the RBI to stay proceedings in Allahabad High Court against applicability of the February 12 circular on the cash-strapped power sector. The SC would further hear the matter on August 28, when RBI’s plea to transfer the case from the High Court to the apex court would be considered.
While RBI is sticking to its stand, there is no concrete resolution or road map offered by the power and finance ministries. “Both the ministries keep throwing the ball in each other’s court. The deadline will be over on Monday. The sector is literally on the mercy of court and banks,” said an executive from DB Power.
While the State Bank of India said on Friday that it will reach a resolution for projects worth Rs 17,000 crore, it is likely to impact only players for whom SBI is the lead banker, such as Adani Tiroda, which has an outstanding of Rs 11,700 crore, Jaypee Bara with an outstanding of Rs 11,494 crore, DB Power Baradarha with outstanding of Rs 6,721 crore.
Many power assets under construction have already been referred to the NCLT for not servicing their loans, which includes Lanco’s 1,320 MW plant in Odisha, East Coast Energy’s 1,320 MW Andhra Pradesh unit, Athena Energy’s 1,200 MW Chhattisgarh plant and others like GMR’s 1370 MW Raikheda plant, Coastal Energen’s 1,200 MW Mutiara plant and KSK Energy’s 3,600 MW Akaltara plant.