SC’s Winter Vacation Latest Roadblock To Power Sector NPA Resolution: Projects Worth Rs 2 Lakh Crore In Limbo

The Supreme Court (SC) has delayed the hearing of a case brought by a consortium of power companies against the RBI (Reserve Bank of India) circular, to after its vacation, reported Business Standard (BS). SC’s winter vacation will run from 17 December to 1 January 2019 and the judgement on the issue is not expected to deliver before February.

The case pertains to RBI’s circular, issued in February 2018, that directed lenders (banks, NBFCs and other creditors) to either execute a resolution plan for some of the biggest NPAs (Non Performing Assets) in the power industry or file insolvency petitions against the companies operating these thermal power plants, in NCLT (National Company Law Tribunal).

A total of Rs 2 lakh crore of thermal power plants projects are facing insolvency due to financial and operational issues and their promoter companies have found it difficult to find buyers for these assets.

Though Allahabad High Court refused to stay the RBI circular, the SC stayed did so in September. However, lenders and power plants are allowed to arrive a resolution plan outside of NCLT.

It should be noted that many of these power plants are unable to service their debt. This, in turn, has been caused by insufficient payments received from private and public Discoms (distribution companies). Discoms are forced to sell electricity at a discount to consumers, thus affecting their fiscal balance.

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