Thursday, November 27, 2014

Move to recharge power projects
New Delhi, Nov. 26: Stalled power projects in the country could be recharged with the government’s action plan to increase generating capacity by asking banks to help revive such projects and by providing fuel linkages.

Power minister Piyush Goyal today met oil minister Dharmendra Pradhan to chalk out the rescue package that may involve rescheduling of loans to power companies as well as making available fuel at affordable prices by pooling cheaper domestic gas price with costly imported LNG.

The two ministers did not divulge details of the rescue package finalised today which may need the cabinet’s approval.

“Today’s meeting was a precursor to final decisions which will be taken very fast,” Goyal told reporters after the meeting.

“We are drawing up plans to increase the generation of power, to put national assets to good use and keep the energy cost affordable with a sustained policy framework,” he added.

Pradhan said the government was taking a comprehensive view of the variety of problems plaguing this industry for a long time.

The issues of making power available to the people and addressing peak load shortages were also discussed at the meeting.

When asked about the decision on gas price pooling, Goyal said, “We looked at all options, including problems of gas-based plants ... macro issues have been taken care of,” he said without divulging further details on the subject.

“We have decided to resolve all the problems, from bankers issues to fuel issues,” Goyal said.

“The coal block auction would reduce tariff and help in providing fuel to power plants,” Goyal said.

The coal ministry plans to auction the cancelled blocks within three months.

To help stalled projects, the government may ask banks to reduce interest rates to the base level or even less, extend the loan repayment period to about 25 years from 10 and allow the plants to capitalise losses over a certain period after the start of commercial operations.

A bank chairman said each bank will also separately assess the viability of the projects to be offered last mile financing and see if a special dispensation can be sought from the RBI to give them money even when some of these projects have turned defaulters.

The finance ministry will discuss with the Reserve Bank the viability of offering financial relief to stranded plants that are unable to meet their debt obligations since March 2013 because of lack of domestic gas. Such a measure will benefit firms such as Reliance Power, Essar Power, GMR Energy, Lanco Infratech and GVK Group.

The meeting also looked at strengthening the grid and creating reserve energy to prevent a grid collapse like in 2012, the minister said.

A report released earlier this year by Fitch Group’s India Ratings & Research has cautioned that power project investments worth some Rs 1,75,000 crore could turn into bad assets unless coal and gas supply glitches were resolved.

Coal mining projects, which would feed new power plants have been held up by delayed environmental clearances even as gas pricing issues have held up gas supplies.

The report noted that coal supplies from Coal India could guarantee only 65 per cent of supplies contracted by it so far to power producers. The government targets to add 88,000MW of fresh generation capacity in the 12th Plan.

A tax holiday could act as a catalyst in attracting the much-needed investment in the sector, analysts said. Against the planned 78,000MW, India added only 50,000MW between 2007 and 2012.

Low investment in the power sector can have serious implications as the demand for electricity is likely to rise by a third from the current financial year’s estimates to 1,403 billion units by 2016-17.

Courtesy: The Telegraph
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