The Allahabad High Court on Tuesday reserved its judgement on the case where private power producers wanted the Reserve Bank of India (RBI) to allow special dispensation to the power sector regarding its February 12 circular. While sources said that the order is expected later this week, the industry is on tenterhooks as the deadline of August 27 for formulating resolution plans for 34 power plants comes precariously closer. The RBI’s circular stipulates a one-day default rule on term loans, which means a borrower who misses repayments for 90 days will be treated as a defaulter the very next day.
As per the circular, lenders will have to come out with a resolution plan for as many as 34 stressed power plants worth Rs 2.5 lakh crore and combined capacity of 39 GW within 180 days from the reference date of March 1, 2018 (by August 27, 2018), failing which insolvency proceedings will be initiated against the debtors.
The central bank has reiterated several times that the circular cannot be relaxed exclusively for the power sector assets, adding that if the government feels, it should use its powers and issue directions directly to the central bank.
The industry, along with the power ministry, has maintained that the 180-day timeline for restructuring of the assets is insufficient, which RBI disagrees. While the independent power producers and the power ministry have attributed the crisis in the sector to delayed payments by discoms, irregular coal supply and regulatory delays, the RBI has said government policies like preferential treatment to state-owned power utilities like NTPC caused the problems.
The RBI is also understood to have raised the issue of the Allahabad High Court’s jurisdiction in this regard and wants all similar cases pending before the high courts of Delhi, Allahabad and Madras transferred to the Supreme Court. It claimed that there is a likelihood of conflict of judicial decisions that would lead to “confusion and uncertainty for lenders, borrowers, defaulters and other involved parties”. Meanwhile, independent power producers have asked the RBI to extend the last date for finalising resolution plans for defaulting projects to November 16 from August 27, as the central bank released the list of authorised credit rating agencies only on May 21, effectively reducing the time available to implementing resolution plan by 82 days.