New Delhi/Mumbai: Lenders to stressed power assets may decide on debt recasts, sale of assets and one-time settlements by 10 October, failing which they may approach bankruptcy courts, two people aware of the deliberations at a Thursday meeting of lenders in Delhi said.
The meeting, which follows deliberations of an empowered committee headed by cabinet secretary P.K. Sinha on the issue, comes in the backdrop of the Supreme Court granting interim relief to stressed power firms, directing lenders to maintain a status quo on the Reserve Bank of India’s (RBI’s) circular to banks directing them to resolve these cases within 180 days.
The court said all pleas filed by RIB related to the February circular should be transferred to it and it will hear the matter on 11 November.
The apex court has asked the government to decide and take action within 15 days, under Section 7 of the RBI Act. It also asked the panel led by Sinha to decide on debt resolutions within two months in consultation with RBI. Section 7 of the RBI Act states that the Union government, in public interest, can give directions to RBI from time to time.
The Thursday meeting hosted by state-run Power Finance Corp. (PFC) in New Delhi was attended by major power sector lenders, including State Bank of India, Punjab National Bank and state run Rural Electrification Corp.
“A commercial decision has to be taken. There is a general feeling that some banks are not supportive of quick resolution. However, good assets shouldn’t be undersold," said one of the two people cited above, requesting anonymity.
Some stressed projects have drawn bids for around ₹ 35 lakh per megawatt (MW) under the Insolvency and Bankruptcy Code, a fraction of the ₹ 5 crore per MW needed to build them, stoking concerns that the assets will be sold at throwaway prices.
Also, the government is planning to set up an asset reconstruction company, tentatively named Power Asset Revival through Warehousing and Rehabilitation, or Pariwartan, to warehouse stressed power projects and protect their value until demand for power recovers.
“The banks were appraised of the steps and efforts taken by the government. There shall be a deadline by which a decision needs to be taken. It has to be a commercial decision taken by bankers," said a top government official, who also didn’t want to be named.
Phone calls and text messages to PFC chairman and managing director Rajeev Sharma and PNB chairman Sunil Mehta remained unanswered.
The government has reviewed 34 coal-fuelled power projects, with an estimated debt of ₹ 1.77 trillion. Issues faced by these projects include paucity of funds, lack of power-purchase agreements and absence of fuel security.