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Government sets up panel to resolve issues of stressed thermal power assets

The Union Government has decided to set up a High-Level Empowered Committee headed by Cabinet Secretary to address the issue of stressed thermal power assets.

The information was shared by the Union Power Ministry. The Ministry stated that the high-level panel has been set up with a view to resolve the stress and revive such assets. The Ministry asserted that the stressed thermal power assets are a cause of concern for the whole country.

Composition of the Committee

Headed by Cabinet Secretary, the panel will comprise representatives from the ministries of railways, finance, power, coal and the lenders having major exposure to the power sector.

Key Duties

The committee will look into the various issues with a view to resolve them and maximise the efficiency of investment including changes required to be made in the:

- Fuel allocation policy

- Regulatory framework

- Mechanisms to facilitate sale of power, ensure timely payments

Provisioning norms/ Insolvency and Bankruptcy Code (IBC)

- Asset Restructuring Company (ARC) Regulations

The committee will also consider if changes are required in any other measure proposed for revival of stressed assets so as to avoid such investments becoming non-performing assets (NPA).

Background

The suggestion for setting up of the empowered panel was given by the Finance Ministry’s Department of Financial Services in its report.

The report came after Allahabad High Court in June 2018 had ordered that no action will be taken against power producers till they are heard.

The power generation companies had challenged Reserve Bank of India’s (RBI) February 2018 circular, which had laid down stricter timelines for initiating the insolvency proceedings.

The private power producers feared that RBI’s new regulations will push projects with capacity of about 60,000-70,000 megawatts (MW) towards bankruptcy and had sought more time.

A similar scheme was introduced by the Rural Electrification Corp to turnaround assets of such stressed plants.

The REC, which is under the administrative control of the power ministry, shortlisted 11 power plants with an overall capacity of over 12 GW, which were either complete or nearing completion, under SAMADHAN (Scheme of Asset Management and Debt Change Structure, or Samadhan).

The SAMADHAN scheme aims to avoid liquidation of these plants at throwaway considerations.

 

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