Banks may get Rs 10k-cr relief for troubled power loans

Banks may get Rs 10k-cr relief for troubled power loans

The Centre is set to clear an estimated Rs 10,000 crore relief package for banks, which are facing the prospect of loans to 25 mega power projects turning sour, because promoters are unable to find buyers for their capacity in the current surplus market condition.

Sources said the package, expected to be taken up by the Cabinet on Wednesday, proposes extending the time limit by another 60 months for sealing PP As (power purchase agreements) for the entire capacity of a project.

Simultaneously, it is being proposed that lenders will release bank guarantees furnished by the promoters in proportion to the capacity for which PPA is signed. But to safeguard the interest of banks, the released funds will go to the lenders towards servicing of debt.

Power plants of 1,000 MW and above are categorised as ‘Mega’ projects, which get customs duty benefit on equipment and other benefits. The customs duty benefit, however, entails furnishing of bank guarantee which is released after PPAs for the entire capacity of a project are signed. These 25 mega projects were approved in 2012 with the aim of fast ramping up of generation capacity since the country was facing acute shortage of power. The projects were given 60 months to tie up PPAs, which did not appear too difficult in a sellers’ market as long-term contracts offered cheaper rates. Read More…


Credit By: The Times Of India

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