Finding an “optimal solution” for stressed power projects within 180 days — as stipulated by the Reserve Bank of India (RBI) in its February 12 circular — is “almost impossible” and that every project would ultimately land up at the National Company Law Tribunal (NCLT), said P V Ramesh, Chairman and Managing Director (CMD), Rural Electrification Ltd (REC) to the Parliamentary Committee on Energy.
On February 12 this year, the RBI issued a ‘Revised Framework for Resolution of Stressed Assets’ that stated that the lender banks would have to bring a resolution plan within 180 days of default of big accounts. The Parliamentary Committee on Energy studied the impact of this circular on non-performing assets of electricity sector and tabled the report on Tuesday in Lok Sabha.
“Exactly in 180 days to find an optimal solution and resolve is almost impossible. We have submitted a timeline to the Ministry (of Power) that minimum, if no roadblocks come in between, 231 days are required because you have to prepare bidding document, technical and financial operation, then you have to invite bids and evaluate, document it and create security also. All these aspects within 180 days is almost impossible,” Ramesh told the committee, as per the report.
He added: “Ultimately, solution is the NCLT only. It means every project will ultimately land up in NCLT where pipeline will be chocked. There are limited number of judges. It will not be easy.” The Indian Express reported on July 27 that among all the reform proposals suggested by the Central government to deal with 34 stressed power projects, the RBI has told the finance ministry that it is open to Pariwartan scheme of REC under which there would be an ARC (asset reconstruction company) specifically to take over these stressed power projects.
The RBI circular states that the resolution plan has to be implemented within 180 days with 100 per cent consensus among lenders. Ramesh told that the committee that “unfortunately, 100 per cent consensus to be reached is difficult because in some projects we have as many as 27 banks”. As on May 31, 2018, out of 34 stressed assets, seven projects worth 7620 MW capacity have been resolved after allocation of coal under Shakti scheme of Ministry of Power. Seven other projects have already been “admitted” or “referred” in the NCLT, according to the Finance Ministry.
Ramesh also told the committee: “Those projects which are less than 50 per cent completed, there is no hope of them being revived unless the promoter does something outside the formal structure that exists today. There is not much hope of retrieval. They would have to go to the NCLT. The projects of 16,000 MW perhaps have no scope but to go to the NCLT and be liquidated for whatever their value is or find an alternate use.”
The 34 stressed assets are of total 38,870 MW. Talking about aforementioned 16000 MW projects that have “perhaps no scope”, Ramesh added: “If there is land available, maybe, that could become a real estate option or it could be an industrial estate. There must be other economic or commercial opportunities that exist. But it may not be a power project. As a power project, we do not see a viability for them but I am sure they would have economic opportunities that could find a place.”