Govt plans ‘Pariwartan’ scheme for power sector revival

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: SAMADHAN, Pariwartan Schemes

Mains level: Read the attached story


News

Stressed Power Projects

  1. Stressed projects have drawn bids for around Rs 1-2 crore per MW under the insolvency and bankruptcy code, a fraction of the Rs 5 crore per MW needed to build them.
  2. Issues faced by the stressed projects include a paucity of funds, lack of power purchase agreements and fuel shortages.

Plan for PARIWARTAN

  1. The government plans to warehouse stressed power projects totaling 25,000 MW under an asset management firm to protect the value of the assets (Similar to SAMADHAN Scheme)
  2. This will prevent their distress sale under the insolvency and bankruptcy code until the demand for power picks up.
  3. State-run Rural Electrification Corp. Ltd (REC) has identified projects with a total debt of around Rs 1.8 trillion as part of the scheme, which is under government consideration
  4. It has been tentatively named Power Asset Revival through Warehousing and Rehabilitation, or ‘Pariwartan’.
  5. The ‘Pariwartan’ scheme is inspired by the Troubled Asset Relief Programme, or TARP, which was introduced in the US during the 2008 financial crisis.
  6. The proposed plan also aims to stem the rise in bad loans in the power sector.

Key Propositions

  1. These stressed power projects will be housed under an asset management and rehabilitation company (AMRC) that will be owned by financial institutions.
  2. While the promoter’s equity will be reduced to facilitate a transfer of management control to the financial institutions, the lenders will convert their debt into equity.
  3. The AMRC will manage the projects and may ask utilities such as NTPC Ltd to operate and maintain them. The AMRC will charge a fee and help complete projects that are stranded for lack of funds.
  4. These projects will be transferred to the AMRC at net book value, wherein it will own a 51% stake in the projects and the balance 49% will be held by the lenders,” said the government official cited above.

Back2Basics

Scheme of Asset Management and Debt Change Structure (SAMADHAN)

  1. Under Samadhan, the bankers’ consortium shortlisted 11 power plants with an overall capacity of over 12 gigawatts, which are either complete or nearing completion.
  2. The debt order will be reduced to a manageable level and converted into equities which are held by banks.
  3. That equity would be bid out to any players who want to buy those assets.
Policy Wise: India’s Power Sector
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