In an attempt to help revive stranded power generation projects, Power Finance Corp. Ltd (PFC) and PTC India Ltd will procure electricity from such projects for sale to distribution utilities.

“PFC Consulting Ltd (PFCCL), a wholly owned subsidiary of Power Finance Corp., has entered into a memorandum of understanding (MoU) with PTC India for jointly exploring opportunities for procurement of power from coal-based commissioned thermal power projects for supply to discoms and facilitate signing of power purchase agreements (PPAs)," PFC said in a statement on Friday.

It would work like this. For projects that don’t have a PPA, bids will be called to help meet the electricity demand of states. This, in turn, will translate into the much-needed PPAs for such projects.

A total of 34 coal-fuelled power projects, with an estimated debt of Rs1.77 trillion, have been reviewed by the government after being identified by the department of financial services. Issues faced by these projects include paucity of funds, lack of PPAs and absence of fuel security.

Non-performing assets (NPAs) in power generation accounted for around 5.9% of the banking sector’s total outstanding advances of Rs4.73 trillion, according to the second volume of the Economic Survey 2016-17 released in August. Tackling the issues that afflict the so-called stranded power assets will provide much-needed relief for Indian banks weighed down by bad loans.

Indian banks are weighed down by stressed assets of close to Rs10 trillion. Of this, gross NPAs account for Rs7.7 trillion and the rest are restructured loans.

The much-awaited move comes in the backdrop of India’s largest power generation utility, NTPC Ltd, recording its highest ever quarterly generation in the three months ended 31 December, indicating a recovery in electricity demand.

Any fresh demand for electricity, the absence of which is weighing down the entire power sector, will also help in resolving the stressed assets conundrum and improve their financial viability.

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