Union Minister R K Singh today said Rural Electrification Corp is working on a scheme similar to what the SBI-led group of bankers came out with to takeover unsustainable debt of stressed power plants to avoid their liquidation.
The Rural Electrification Corporation (REC), which is under the administrative control of the power ministry, has drawn up a plan to turnaround assets of such stressed power plants, the power minister said.
Under SAMADHAN (Scheme of Asset Management and Debt Change Structure, or Samadhan), the bankers' consortium shortlisted 11 power plants with an overall capacity of over 12 GW, which are either complete or nearing completion. This scheme is an effort to avoid liquidation of these plants at throwaway considerations.
"State Bank of India and some banks have come together. They blew up a scheme called SAMADHAN. Under this scheme, they will try to revive some assets to run. They have selected 11 plants," Singh said at a press conference here.
Elaborating further, he said, "The debt order will be reduced to a manageable level and converted into equities which are held by banks. That equity would be bid out to any players who want to buy those assets. That is how these assets would work."
"REC has also drawn up such a scheme in our ministry. We have mentioned this to the finance ministry. The attempt is that the assets which can be salvaged are salvaged. We don't want that these assets are sold for Rs 1 crore or 2 crore per MW (against investment of Rs 6 to 7 crore). We want to put in a mechanism to make these assets turnaround."
Under the scheme, the bankers have identified 11 projects including Lanco Infratech's Anpara power plant, Jaypee Power Ventures' Nigrie power plant and KSK Mahanadi plant in Chhattisgarh.
Under the SAMADHAN scheme, the bankers are addressing those assets which are either complete or near completion. The idea is to carry out an assessment what would be sustainable debt of these assets, and the remaining debt which is unsustainable would be converted into equity (to be held by the banks) -- 24.5 per cent to be allowed to remain with promoters.
The bank can bid this equity to players who want to run these plants. The idea is that these plants will be run and not liquidated.
The minister said, "The REC scheme is also a variation of this. They will form an SPV which would hold this asset and run this asset till the situation improves."
On RBI circular, the minister said that Allahabad High Court has stayed it and the finance ministry will call the meeting of stakeholders in June.
Earlier last week, the Allahabad High Court had given a relief to stressed power projects which are facing threat of being pushed into insolvency proceedings.
The Court had said that no action be taken against these projects under the Reserve Bank of India's (RBI) February 12 circular which mandates early detection and resolution of stressed assets till the finance ministry called a meeting of relevant stakeholders in June to see if the issues could be resolved.
The court's ruling is applicable to petitioners under Independent Power Producers' Association of India. The RBI circular curtails bankers' freedom in dealing with stressed assets.
The RBI's circular requires banks to finalise a resolution plan in case of a default on large accounts of Rs 2,000 crore and above within 180 days (irrespective of sectors), failing which insolvency proceedings will have to be invoked against the defaulter.
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