Around 22% of India’s installed power-generation capacity burdens Indian banks as non-performing assets (NPA). There is little scope of restructuring them through the Insolvency and Bankruptcy Code route, because the problem lies in bankrupt politics that makes state utilities incapable of buying power from generators and not with the generation projects per se.
Unless the politics is reformed, buying into power generation will prove a dud investment. Therefore, the scheme the banks have come up with, of converting their debt into equity in the power assets and selling these on to patient capital, makes sense.
However, the banks’ hope that the National Investment and Infrastructure Fund would come forward to willingly hold these assets might prove unrealistic. The banks should partner Power Finance Corporation or PTC India Financial Services to create the patient capital they need. Read More