Tips to cut power bad loans

Calcutta: Government intervention through reforms in financing, better coal availability and streamlining power distribution could help in the resolution of stressed assets in the power sector.

"The thermal power sector in our country is going through an unprecedented stress which is likely to result in non-performing loans of about Rs 5 lakh crore, thereby pushing the power assets towards bankruptcy," Hemant Kanoria, chairman and managing director of Srei Infrastructure Finance, told The Telegraph.

According to a report of the parliamentary standing committee on energy tabled in March, the gross loans and advances in the power sector across generation transmission and distribution segments stood at Rs 5.59 lakh crore as of June 2017. Of this amount, the gross non-performing asset was Rs 37,941 crore and restructured advance was Rs 60,858 crore.

The committee in its report also identified 34 thermal power projects, including that of Adani, Essar, GMR, GVK, Jaypee, Monnet, Lanco with a total stressed capacity of 40,130MW.

"The primary focus of all stakeholders at this juncture should be to preserve and protect the principal amount that the banks have lent to various power projects so far and ensure the stressed power assets are maintained in a reasonable working condition. There is a need for the government to bring together banks, project promoters and build a consensus on a case by case basis," Kanoria said.

He added that some simple and practical solutions could help resolve the stress in the sector.

These include determining the sustainable and unsustainable portions of the debt, conversion of the unsustainable portion to long term (10-15 years) redeemable preference shares, reduction of interest rate, increase coal availability on a "pay and take" basis, flexibility to buy coal from anywhere and streamlining administrative steps towards open access and parallel licences.

Industry observers have expressed concern over the RBI's February 12 circular on the resolution of stressed assets. The parliamentary committee had also voiced their views in the report.