Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 3.5
Article rating: 5.0
Article rating: No rating
Article rating: 4.7
Article rating: No rating
Article rating: No rating
Article rating: 5.0
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: 5.0
RSS

News

Par panel suggests new framework for stressed assets in power sector

Author: PTI/Wednesday, August 8, 2018/Categories: Energy

Par panel suggests new framework for stressed assets in power sector

New Delhi - A Parliamentary panel today recommended new framework for resolution of stressed assets in power sector saying the Reserve Bank's framework, brought in February, "addresses only financial issues, ignoring the whole range of vital issues of electricity sector".

The RBI's revised framework for resolution of stressed assets has laid down strict timelines after which insolvency proceedings are initiated. The framework terms even a one-day delay in debt servicing as default. The banks are required to ensure resolution plans within 180 days after default. It covers debt exposure of Rs 2,000 crore or more.

The central government has already recommended extension of the deadline for ensuring resolution plan by another 180 days in its submission before Allahabad High Court earlier this month. The court had stayed the RBI circular for power sector earlier this year.

According to a report of Parliamentary Standing Committee on Energy tabled in Parliament today, about 66 GW of conventional energy is under various degrees of financial stress, which include 54,805 MW of coal based power (44 assets), 6,831 MW gas based (9 assets) and 4,571 MW of Hydro (13 assets). In addition, certain assets from power sector have already been referred for CIRP (Corporate insolvency resolution process) under the IBC (Insolvency and Bankruptcy Code).

The committee noted that the outcomes of the RBI's revised framework with respect to the electricity sector have been very disappointing, with major lenders to IPPs (independent power producers) displaying significant accretion to NPAs (bad loan) and their slippages have exceeded Rs 1.8 lakh crores in Q4 FY 2018 (January-March 2018), while slippages of 6 major lenders have exceeded Rs 61,000 crores.

The panel has recommended, "With a view to ensure power security and also to avoid wastage of collective efforts, a new framework should be put in place which safeguards the transient sagging situation of the Electricity Sector and provides the much needed stimulus".

It also said the RBI framework is ignorant as well as unmindful of prevailing reality of the electricity sector and that is why it addresses only the financial issues, ignoring the whole range of vital issues of the electricity sector.

The panel was of the view that the power sector, being the nucleus for growth of Economy and development of the nation, should be protected from this temporary phase of uncertainty so that these power plants can be put to use at the time of need, which is certain to happen sooner than later.

It found that the nominal principles for resolution are more chimerical than practical as on the one hand, it is acknowledged that reasons for stress are not identical, while on the other hand similar and identical tools are taken recourse to remedy the malady.

The panel has recommend that appropriate, relevant and sector specific measures should be explored to address the issue.

"The committee was not convinced with the reasons given by the government to justify their formula for resolution of stress because different ailments can be cured only with ailment specific remedies and if a single remedy is taken as panacea for all maladies and applied uniformly all across, it is bound to be counter productive and is sure to aggravate the problem," it said.

The committee recommend that instead of adopting a sector agnostic approach for stress resolution, more penetrative and sector friendly measures should be adopted.

It also suggested that in the interest of the economy in general and the electricity sector in particular, the revised guidelines should be “harmonized and simplified” in the real sense.

It also said, "The government should be sensitive to this vital sector of our economy which acts as a core to shoulder the other engines of the economy and thus the Committee postulate that the specifics and realities of the sector should be taken into account for appropriate modulation of the RBI Guidelines".

Print Rate this article:
No rating

Number of views (268)/Comments (0)

rajyashree guha

PTI

Other posts by PTI
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free