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Power producers ask RBI to relax default clause

Power News - Published on Mon, 19 Mar 2018

Image Source: thehindubusinessline.com
Economic Times reported that power producers have sought special consideration from the Reserve Bank of India regarding the new norms announced for stressed assets, citing that the sector faces problems which are “beyond developers’ control” and this norm can potentially affect projects totaling 75,000 megawatts.

In a letter to RBI governor Urjit Patel, the Association of Power, said that “You would agree that the system has to be tolerant of genuine difficulties, while coming down heavily on mismanagement and fraud. Considering the significant exposure of these assets to factors which are completely beyond the control of developers, we request you to issue special dispensation for the power sector.”

The central bank’s notification ‘Resolution of Stressed Assets – Revised Framework,’ made it mandatory for banks to classify even a one-day delay in debt servicing as default. In case an account, with exposure of Rs 2,000 crore and above as on March 1, 2018, defaults, then they have to formulate a resolution plan and execute it in 180 days, or the account will be referred to NCLT for Insolvency and Bankruptcy Code (IBC) proceedings.

The association said there are currently over 75,000 mw assets either under operation or under construction severely stressed due to reasons such as lower availability of coal, lack of long and medium term power purchase agreements, divergence between policy and regulations on pass-through of incontestable change in law factors, huge delays in regulatory orders, and pending=-= receivables from discoms.

The power producers have requested that the central bank relaxes the “default” clause from one-day delay in debt servicing and classify the asset as NPA only after the completion of the 180-day period. They have also sought an extension in the 180-day timeline for the implementation of resolution plan and relaxation in norms on rollover of credit facilities, sanction of additional credit facilities and enhancement of existing credit facilities.

The association said that “There are over 20,000 mw of private sector assets with an investment of INR 1 lakh crore that are operating with long-term PPAs with necessary fuel supply. However, these assets are still under stress due to various factors beyond their control.”

Source :

Posted By : Rabi Wangkhem on Mon, 19 Mar 2018
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