Banks vow support to power sector

Banks have assured power producers they would continue to support the sector, hit by the Supreme Court verdict cancelling coal block allocations, and battling a fuel supply crunch.

At a meeting on Friday, attended by members of the Association of Power Producers, bankers and Financial Services Secretary G S Sandhu, the power sector representatives discussed issues with key lenders, saying delays in necessary clearances could lead to time and cost overruns.

The members of the association said coal-based projects of 46,500 Mw, with an investment of more than Rs 3 lakh crore, could be at risk. Sandhu said the banks would keep money available to keep projects viable while clearances are obtained.

He also set up a committee, headed by India Infrastructure Finance Company Ltd chief Santosh Nayyar, to examine the financial issues faced by the power sector.

On the sidelines of another event, minister of coal, power and renewable energy Piyush Goyal said: "We have had discussions with the banks and they have faith in the working of the central government. All efforts are being taken to revive the coal sector post the Supreme Court judgment."

This was Goyal's first statement since the September 24 ruling. He also said the government wants the participation of the private sector. In the coming six months, it will be ready with a plan to boost investment the power sector.

On September 24, the Supreme Court had cancelled the allocation of 204 coal blocks with a cumulative capacity of 45,000 million tonne over the past two decades.

This decision would have a serious effect on the power sector, claim experts. Of the 136GW stranded power generation capacity, with an investment of Rs 6.23 lakh crore, capacity worth Rs 4.36 lakh crore is feared to become non-performing assets.

To add to the woes of the power sector, close to 28,000 Mw power capacity is stranded because of the Supreme Court judgment. Around Rs 5 lakh crore has been invested in this sector by bankers.