Don't send stressed assets to IBC: PowerMin to FinMin

The IBC experts suggest that one ministry can't advise another ministry over this issue.

The RTI reply also revealed that the power ministry had sought an extended 270 days time period to resolve stressed assets as against the standard 90 days period. (File Photo for Representation)

The Ministry of Power has advised the Finance Ministry not to refer stressed power-plants to the National Company Law Tribunal (NCLT) for the bankruptcy procedure in a bid to prevent losses to the banks, an RTI has revealed.

A letter from the Minister of Power RK Singh to the then Finance Minister (with interim charge) Piyush Goyal advised the Finance Ministry against any such move to put the 34 power plants, which owe in excess of Rs 1.8 lakh crore to banks, through the Indian Bankruptcy Code (IBC) procedure.

“Pushing such assets for resolution under the IBC in a hurry may jeopardise the energy security of the country and may force liquidation of such assets at a fraction of their cost thus causing huge losses to the banking sector. It may not be out of place to mention that NPAs in the power sector form the largest chunk of total NPAs in the banking sector,” the letter dated June 20, 2018, sourced from RTI activist Venkatesh Nayak by DH, revealed.

It is pertinent to note that the discretion of referring the stressed assets through the bankruptcy procedure lies with the creditors and the government has no role to play in it, according to the law. "I don't know what exactly happened... But it's the sole discretion of the creditors to refer companies to NCLT," a senior Finance Ministry official told DH.

The IBC experts suggest that one ministry can't advise another ministry over this issue. "That's ridiculous! There are going to be losses for banks anyway in the IBC process. It cannot be advised in writing," Sandeep Kumar Gupta of Whitworth Insolvency Professionals said.

The RTI reply also revealed that the power ministry had sought an extended 270 days time period to resolve stressed assets as against the standard 90 days period.

Of all the NPAs in the power sector, KSK Mahanadi Power Company tops the list with Rs 19,373 crore, followed by Adani Power Maharashtra Ltd (Rs 14,850 crore) and Prayagaraj Power Generation Corporation (Rs 11,494 crore) among others.

The country’s largest lender State Bank of India alone comprises of 12 of the 34 stressed assets, followed by Power Finance Corporation (5), Axis Bank (4) and Punjab National Bank (4), among others.

The detailed communiqué between Prime Minister’s Office, Power Ministry, and the Finance Ministry reveal that despite instructions to inspect all the stressed power plants, the government has inspected only seven power plants, and none of them are among the top three NPAs of the sector.

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