Power News We love to talk!

JUN 24 2014

Piyush Goyal refuses easy terms for power sector financiers

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 24th JUN 2014

Power, coal and renewable energy minister Piyush Goyal said the stress in the electricity sector was not as severe as it was being made out to be and lenders to power projects could work on a recovery in the next few years.

Power capacity of thousands of megawatts is stranded or idling because of fuel shortage, poor health of distribution companies and environmental issues. Power producers have said in the past that the situation was also a concern for lenders to the sector.

After a meeting with top lenders to the sector, Goyal said there was an opportunity in the situation. "I am told that the stress on financial institutions is not as bad as it is made out. Power is the need of the hour and personally I feel that utilities are good assets as market has demand for what they are going to provide. All we have to do is smoothen the edges. For me, it is an opportunity and not a crisis," said Goyal.

He said the challenges of financial institutions for funding stranded power projects was not going to ease soon as offering any incentives or changing RBI norms for lenders was not in government's hands. Lending to the power sector, particularly to developers and distribution utilities, is risky in the present economic condition and financial institutions are seeking government support for timely recoveries, industry executives say.

Top executives of some of the largest financiers of the power sector such as State Bank of India, ICICI Bank, Citibank and Power Finance Corporation met power, coal and renewable energy minister Piyush Goyal on Monday to discuss their challenges. Bankers who presented status report of their borrowers also stated that design, build, finance, operate, transfer (DBFOT) model of bidding for ultra mega power projects is not bankable. They also suggested government should ensure viability of natural gas-fired power projects by either using them to meet peak demands or bundle their generation with NTPC's supplies to state utilities.

After the meeting, Goyal told reporters that stakeholders in the sector will have to support the system to improve the situation, which is an opportunity in a country like India that needs more electricity.

Ruling out any relaxations for lenders or borrowers, Goyal said: "It is not an individual bank, company or ministry related issue and we have to look at it in national perspective. I believe we have to respect RBI's efforts of the last 20 years to strengthen the Indian banking system and within that system, I feel as there are more than enough avenues to resolve problems.

We are not looking for great incentives or change in RBI laws." He added that issues such as inaction by previous government, promoters taking systems for granted, uneconomical fuel supplies, states are not supplying electricity at the right price and power theft have caused problems in power sector. "However, we want to resolve problems by working in tandem with support from the stakeholders instead of getting into a blame game," added Goyal.

On Monday, bankers discussed issues related to the financial health of electricity distribution utilities at length with Goyal, who stressed on the need for participation of private sector. Power ministry will device a mechanism where states can be motivated to increase the role of private sector in distribution.

In what may bring relief to solar power equipment makers, Goyal said his ministry has appealed to both commerce and finance ministries to review their possible move to impose anti-dumping duty on imported gears.


Power Finance Corporation Finance NTPC Ltd Bank of India RBI Power India solar power

Related News

  • Solar power projects in India to get $1 bn boost; heres how  Read more
  • Coal imports rise 2 per cent to 18.6 million tonnes in August  Read more
  • Centre may cap number of subsidised LPG cylinders at 9 to bring down deficit  Read more
  • ONGC stake sale: Govt seeks bids from investment banks  Read more
  • Petrol price hiked by 70p/ltr, diesel by 50p/ltr, effective midnight  Read more
  • Madras HC dismisses plea against power project allocation  Read more
  • CERC dismisses petition for tariff revision of Tehri HPP Stage-I as matter becomes infructuous  Read more
  • PTC India launches mobile apps for power traders  Read more
  • CERC: Petition for establishing an appropriate mechanism to offset in tariff the adverse impact of the unforeseen, uncontrollable and unprecedented escalation in the imported coal price  Read more
  • EOW sends notices to freeze assets of Birla Power Solutions  Read more