Plan in the works to fix power sector woes

The government is working on a new scheme involving reforms, incentive and investment support for the power sector, which has over ₹4 lakh crore of exposure, as the stress cannot be resolved under the Insolvency and Bankruptcy Code (IBC) process.

Union Power Secretary Subash Chandra Garg said, “The power sector has distressed assets worth 65,000 MW to 75,000 MW and it is worth over ₹4 lakh crore.

“Banks are trying to resolve [this] in different ways. Some have gone the NCLT route, which has a certain kind of issues. If you resolve through NCLT, nothing will survive, except the plant. The power purchase agreement (PPA) goes away. The fuel supply agreement (FSA) goes away. What will the new entrepreneur get through NCLT?”

When asked about the government’s plans for reviving the sector, Mr. Garg said, “We are talking about new schemes, where reforms can be brought in backed by incentive and investment support by the government. The key in power sector is that power needs to be paid for. The scheme is being discussed. Let’s hope we can do it soon.”

Mr. Garg advocated the involvement of asset reconstruction companies (ARCs) for resolving stress in the power sector instead of resolving under the provisions of existing bankruptcy laws.

“Through ARCs, we can bring in strong power sector players — although strong players in power have become weaker now. ARCs and the industry need to come together and bid. ECB norms have been amended to allow foreign funds to be brought in to repay debts,” he said.

‘Need new players’

Replying to a query from The Hindu, Mr. Garg said, “We need to get new industry players besides existing ones to bid for these assets. There are times when you need new industry players to come in. Airport infrastructure was created when the new industry players came for the first time. It may be domestic or foreign. All of them [stressed power assets] need to be resolved, but how much can be resolved is the question.”

‘Power must be paid for’

On Ujwal Discom Assurance Yojana UDAY scheme revival, Mr. Garg said, “The issue that the UDAY was trying to solve, is to make sure that power is being paid for. Even post UDAY, some entities started delaying payment and ₹40,000 crore bills are unpaid.

“We have recently brought in a mechanism that you have to have a letter of credits (LC) before you buy power and LCs will be encashed if you fail to pay,” he added.

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Printable version | Oct 22, 2021 3:50:50 AM |

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