‘Don’t downgrade power sector loans till Sept 2015’

ROOT Category: Power Topics
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Bankers’ group recommends to Govt

New Delhi, December 2014

The working group of bankers, examining the issues faced by the power sector, has recommended that stressed loan accounts of the industry should not be downgraded till September 31, 2015.

The Group, in its report, has said that since it will take time to consider and implement all the proposals, for now, the Government could consider asking the banks not to term these as non-performing assets and continue with their same classifications.

The Group, headed by Santosh Nayar, Chairman and Managing Director, IIFCL, has made suggestions to ease the burden on such stressed assets based on the issues raised by the Association of Power Producers.

Some of the key recommendations include allowing the holding company to raise money via external commercial borrowings or foreign currency convertible bonds for investment into the special purpose vehicle for the project, shifting of competitively bid projects to regulated tariff scheme and allowing banks to fund cost over-runs of projects.

For the stressed gas-based assets, the Group recommended that lenders may re-examine viability of such projects on a case-to-case basis for a possible financial package.

Discoms rapped

Coming down hard on state electricity distribution companies (discoms), the Working Group advised lenders to be cautious on lending to such discoms and suggested linking additional funding with implementation of Financial Restructuring Package (FRP) terms.

The Group also asked the Ministry of Power to call a meeting of discoms, Ministry of Finance and lenders and ensure FRP terms were adhered to.

Some of the suggestions which would require a lenient regulatory dispensation include provision of fuel supply linkages to projects with de-allocated coal blocks, reducing the rehabilitation and resettlement cost of hydro projects by funding it out of the National Clean Energy Fund, and relaxation of date of commencement of commercial operation norms. Business Line