Thermal power projects with Rs 2.5 lakh crore under stress, says ASSOCHAM-Grant Thornton study

New Delhi: Investments worth over Rs 2.5 lakh crore in thermal sector projects, based on domestic coal, imported coal, and gas, are facing stress and immediate remedial measures need to be undertaken to ensure that they are revived in a time-bound manner, according to a recent ASSOCHAM-Grant Thornton joint study.

The power sector has been under stress with loans worth Rs 1 lakh crore having turned bad or been recast.

“As per the recent estimates, about 66,000 MW capacity is facing various degrees of financial stress including 54,800 MW of coal-based power, 6,830 MW of gas-based power and 4,570 MW of hydropower with lenders having an exposure of Rs 3 lakh crore to these assets,” said the study.

“Non-availability of regular fuel supply arrangements, lack of power purchase agreements, inability of promoters to invest equity and working capital, and regulatory and contractual issues are some of the major challenges faced by thermal power projects.”

The report cited that there is no universal solution for these ailing power assets and a mixed multi-pronged strategy needs to be adopted instead of a straight-jacketed approach.

“This has to be done as there are not enough takers for all of these stressed assets and any unthoughtful action may result in huge credit recovery losses for the banks and financial institutions,” said the study.

While the Insolvency and Bankruptcy Code (IBC) has already been amended four times since its enactment in 2016, the government is willing to amend it to make it stronger and effective. “This is considered imperative to provide an effective solution to thermal power projects.”

Further, an effective resolution in a time-bound manner is warranted by improving the macro environment governing the power sector, said the report.

[source_without_link]ANI[/source_without_link]