Regulatory hurdles may turn infra loans into NPA: FinMin

Delay in regulatory approvals for infrastructure projects worth Rs 1.18 lakh crore poses a serious risk of huge loans disbursed by banks becoming non-performing assets, says an internal note of the Finance Ministry.

According to a list of big infrastructure projects, whose progress was reviewed by the Finance Ministry recently, 13 including 4,000 MW Sasan UMPP and Hindalco's Mahan are facing regulatory hurdles, mainly delay in getting clearances from the Environment Ministry for coal blocks.

"There is an increased risk of already disbursed loans turning into non-performing assets," the Finance Ministry has cautioned. The public sector banks have sanctioned around Rs 61,000 crore to the 13 projects.

This defeats the government's focus on infrastructure sector where it has envisaged an investment of over $1 trillion in the next five years. Of the total investment, private sector is likely to contribute nearly 60%.

The 13 mega projects are a part of the 142 such schemes across the country that are stuck due to regulatory delays despite sanctioning of loans by the public sector banks, as per an official document.

"...Disbursement in 142 large projects where loans of Rs 100 crore or more has been sanctioned by the public sector banks is held up as certain regulatory approvals are awaited. This...Is impacting resultant benefits to the economy," the note said.

Of the 13 mega projects, nine are awaiting environmental clearances. Two are the projects of the mines and the urban development sectors. Eleven of the 13 mega projects pertain to capacity addition in the power sector by players like Reliance Power, Lanco Power, Jindal Power and Essar Power Gujarat Ltd.

Among the projects, Hindalco Industries' Rs 10,500-crore new aluminium smelter project at Singrauli in Madhya Pradesh is awaiting clearance from MoEF. The coal block which falls in the 'no go' mining zone as categorised by the MoEF was referred to a ministerial panel after clearance was rejected.

The Ministry has expressed concerns that the project is being delayed despite banks sanctioning loans to the tune of Rs 7,875 crore.

As far as Reliance Power's Sasan Project is concerned, its Chhatrasal coal block is awaiting green nod. The company is executing the 4,000 MW Sasan Ultra Mega Power Project in Madhya Pradesh and is also developing a project in the nearby Chitrangi district.

The document says that Rs 14,550 crore loan for the Rs 19,400 crore project has already been sanctioned and Rs 527 crore has been disbursed.

Last week, rating agency Crisil had said, "There is an urgent need for strong policy actions to reform the power sector ....We estimate around Rs 56,000 crore or 12% of the lenders' total advances to the sector as potentially risky, if there is no meaningful progress on reforms in the next 18 months."