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Goyal Calls For More Pvt Participation in Power Distribution

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After meeting the bankers to deal with the rising NPAs in the power sector, Piyush Goyal, minister for Power (Independent Charge) has called for more private sector participation in the distribution sector.

The minister met a delegation of 24 banks to discuss the rising NPAs from the power sector due to which financial institutions have stopped lending money to the power sector.

The meeting was attended by heads of all big private and government sector banks including Chanda Kochar, (ICICI bank), Arundhati Bhattacharya(SBI) Rana Kapoor (Yes Bank) among others.

The bankers have refused to extend loan to the power sector projects on concerns related to fuel supply, power purchasing agreements and environment clearances.

“We have all resolved that we shall work as a team to bring about synergy and sort out the problems in the sector. We will look for more private participation in distribution and would require state support for this task," he said. At present, cities including Delhi, Mumbai, Kolkata, Surat and Ahmedabad, along with Odisha state, have privately owned power distribution companies.

On 19th of this month, Goel had met the heads of power sector companies to understand their issues.

According to a report by rating agency Moody's, 20 per cent of the impared loans at all the PSU banks come from exposure to power distribution companies.

According to a report issued by KPMG in 2013, a shortage of fuel has stranded more than 33,000 megawatts (MW) of power generation in India, and if the situation does not improve fast, Indian banks could be staring at a bad debt of more than Rs.1 trillion”

Total exposure of banks to the power sector alone exceeds Rs 3 lakh crore, the bulk of which relates to generation projects, the paper notes.

In 2013, advisor to the then Planning Commission deputy chairman, Gajendra Haldea, had reprimanded Indian Banks' Association, in a letter saying, "The banks evidently lent enormous sums of money to power producers who were encumbered by the fuel price risk as well as the fuel availability risk. This could well be described as 'banana banking'.

The UPA government on its part had offered 1.9-lakh-crore financial restructuring plan (FRP) for the power distribution sector.

Under the scheme, 50 per cent of the short-term outstanding liabilities would be taken over by the state governments and the remainder would be restructured by providing a moratorium on the principal and the best possible repayment terms.

(With inputs from agencies)