NEW DELHI: The power sector is unlikely to get any relief in the near future from its outstanding debt of Rs 1.8 lakh crore, as the Reserve Bank of India (RBI) has refused the Finance Ministry’s request to give forbearance to the sector. The matter escalating to a tug of war between the RBI, the Finance Ministry, the Power Ministry and the bankers is keeping the fate of 34 power projects worth 40,000 megawatts hanging fire.
“We have once again sent the request to the RBI regarding giving forbearance to the power sector loans, but the Central Bank is not ready to soften its stand. There will be a meeting soon among all the stakeholders, but as everyone is rigid in their stand, we do not expect a quick solution of the matter,” Financial Ministry official said.
By its February 12 circular, the RBI had asked the banks to scrap all debt-restructuring mechanisms and begin the resolution process if a company delays payment even by a day. The RBI has maintained that even though the move will hurt initially, it will drain the swamp from the bank’s profit books, as power sector remains one of the biggest contributors to bad loans.
The move was strongly opposed by representatives of the power sector. “The RBI’s new stressed assets framework could push approximately 60,000-70,000 MW power projects towards bankruptcy proceedings,” said Ashok Khurana, Director General, Association of Power Producers.
These concerns are echoed by the 37th report of the Standing Committee on Energy on the stressed assets in the power sector presented to the Lok Sabha on March 7, 2018. According to the report, “simply applying the RBI guidelines mechanically by the banks, financial institutions and joint lender forums will push these plants further into trouble without any hope of recovery.”
Independent Power Producers Association of India also filed a writ petition challenging the RBI circular and to their relief, the Allahabad High Court put on hold action against the power sector under the RBI’s stressed assets framework, earlier this month.
The court also directed the Finance Ministry to hold meetings with all stakeholders in June to consider the grievance of power producers and see if any solution outside the RBI’s resolution process is possible. However, the meeting is yet to take place.
The bankers too feel the RBI’s move is too rigid. The All India Bank Officers’ Confederation has filed a writ petition in Delhi High Court to quash the RBI circular.