New Delhi: The Supreme Court refused the plea of the Reserve Bank of India (RBI) to stay proceedings in Allahabad High Court against applicability of the February 12 circular on the cash-strapped power sector.
The apex court said it would further hear the matter on August 28. At a hearing on August 2 in the Allahabad High Court, the government recommended extension of the RBI circular deadline by another 180 days. In its last hearing, the high court had ordered lenders not to initiate bankruptcy proceedings against power producers.
The verdict of the division judge bench, headed by Rohinton F Nariman, prevented lenders from initiating insolvency proceedings against power producers who may have defaulted on loan repayments unless they are categorised as wilful defaulters. Power producers had challenged RBI’s revised debt norms on NPAs claiming that it could push nearly 75 gigawatts of projects into bankruptcy.
On August 2, the government in its report informed the high court about setting up of a high-level empowered committee, led by cabinet secretary PK Sinha, to revive the projects.
The high court asked RBI to file its responses at the next hearing to be held .
Banks are under mounting pressure from regulators to clean up their books as the government attempts to revive loan growth and boost the sector in some way or the other.
In a letter to RBI governor Urjit Patel in March, the Association of Power Producers had said that revised guidelines, issued in mid-February, are too stringent for a sector battling cash flow issues because of delayed payments by state distribution utilities and late regulatory clearances for cost-related tariff hikes.
As per an action plan of the finance ministry, of the 34 stressed power projects worth 40,000 mw, 12 projects including that of KSK Energy, Jaiprakash Group would be sold off to strategic partner willing to pay over Rs 3 crore for per mw.
Eight projects have been turned around and have become standard assets after getting coal linkage under the Shakti scheme. The government wants the 14 projects to undergo insolvency proceedings under NCLT.