Power sector woes are expected to continue for some time as coal shortage continues, leading to a dip in the generation. Rising demand for electricity and fall in hydropower production due to a dry spell in certain parts of the country is compounding the problem.
An estimated 1.5 million power sector workers and engineers would proceed on a two-day pan-India strike on 8th and 9th January against the ‘privatisation’ policies of the central and state governments.
Lenders to India’s power industry are scheduled to meet Thursday to discuss ways to resolve 1.4 trillion rupees ($19.2 billion) of stressed assets that’s hobbling the sector, people with knowledge of the matter said.
The power sector roughly constitutes 20% of all the bad loans on the balance sheets of Indian banks. While the resolution of stressed power assets is an urgent priority, the government is also preparing reforms to ensure the long-term viability of the sector.
The government has readied a raft of power sector reforms, including implementing the direct benefit transfer (DBT) scheme in the electricity sector for better targeting of subsidies, freeing renewable energy from licensing requirement for generation and supply, and promoting retail competition.
The Allahabad high court’s decision to deny relief to power companies facing debt servicing problems may have stoked fears of a fresh bout of write-offs for the banking sector. But the decision has triggered a rally in the shares of Power Finance Corp. Ltd
The government is considering its options in the wake of the Allahabad High Court’s refusal to entertain the power producers’ petition challenging the RBI deadline for starting bankruptcy proceedings against banks’ NPAs, or bad loan accounts, a senior official said on Tuesday.
What happens from here? Another 180 days’ extension that the power sector defaulters had wanted has not come through.
Flawed politics has stricken the power sector, and its woes have spilt over into banking, a fifth of whose non-performing assets, currently estimated at Rs 10.3 lakh crore, involve some 34 stressed power projects, totalling 39 GW in generation capacity.
With a strategic sale of public sector companies such as Air India (AI), Hindustan Copper and Mecon off the table until next summer’s general elections, the government is eyeing state-run players in the power sector to replicate the ONGC-HPCL model to buy out its stake and also contribute to the “disinvestment” kitty.