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Web Exclusive | December 2012

Banks alert govt over Rs 2.3 lakh laons to power firms

Public sector banks have cautioned the Union government that loans of around Rs 2.3 lakh crore to private-sector power companies are on the verge of turning bad. The public sector banks including the State Bank of India, Punjab National Bank and Oriental Bank of Commerce have sought the Finance Ministry’s intervention to salvage the situation and have been assured of help.

Even as a RS 2 lakh crore debt restructuring for state electricity boards/ distribution companies is about to take off, banks presented their case forcefully to draw an assurance from Finance Minister P Chidambaram that the matter would be taken up with the ministers of power, coal, petroleum and environment.

It is felt that since large investments are sunk into generation projects without being able to contribute to the GDP, defaults by power companies could be turn out to be a threat to the economy.

According to sources, the idea, therefore, is to remove policy hurdles and address delays in clearances to ensure there are no large-scale defaults from these power firms which have invested significantly, but are far from earning revenues.

Sources said banks have reminded the Ministry that they had lent to private power companies on being prodded by the government and on assurance that policy issues would be resolved to make their business viable.

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