Saving Power Projects
The government, banks, and power producers are all working together to save stressed power loans from bankruptcy.
The government, banks, and power producers are all working together to save stressed power loans from bankruptcy. Banks' power sector exposure is around Rs 5 lakh crore; stressed loans are in the region of Rs 1 - 1.25 lakh crore. Refusing sector specific relaxation, the RBI has held that for even a single day default on loans with over Rs 2,000 crore exposure, a resolution must be found in 180 days OR they face bankruptcy.
The solution: The Scheme of Asset Management and Debt Change Structure (SAMADHAN) to save about a dozen power projects that are in good shape. The going, however, will be tough for the rest. Existing ARCs want heavy haircuts from banks and are not buying. And strategic players or distressed funds arent interested.
The new proposed AMC-AIF structure is not in place yet. And if these projects land up before the NCLT, the adjudicating authority for bankruptcy, it would mostly result in liquidation, meaning loss of potentially productive assets and employment. Time is running out fast.
- Anand Adhikari