Also, that the list of financial difficulty signs should be more objective. In the appendix to the February 12 circular, RBI had identified 11 of these, including the failure or anticipated failure to make timely payment of instalments of principal and interest on term loans, delay in meeting the commitment in this regard and crystallised liabilities under letters of credit and bank guarantees.
RBI has said in respect of accounts with aggregate exposure of the lenders at Rs 20 billion or above, on or after March 1, including those where a resolution might have been initiated under any of the existing schemes, as well as accounts classified as restructured standard assets, an RP will be implemented within 180 days from the reference date. If in default after the reference date, 180 days from the date of the first such occurence.
Such cases have to be mandatorily referred to the National Company Law Tribunal (NCLT) for IBC proceedings. APP says if a loan has been restructured as part of an RP, the asset will remain sub-standard in the lender's books till 20 per cent of the loan is repaid. "Usually, it would take four to five years for repayment of the 20 per cent for infrastructure projects and, therefore, banks would have to continue with provisioning (for the stressed asset) for four to five years. This means banks would have little incentive to implement restructuring proposals," went their letter. APP says the new timeline is difficult to comply with and the implementation period of an RP should be extended from 180 days to a year.
The producers say there were at least 75,000 Mw of assets either under operation or under construction which are under stress. The reasons includeless availability of coal, lack of long-term or medium-term power purchase agreements (PPAs) and divergence between policy and regulations on pass-through of costs. They also note the total of dues from power distribution companies are Rs 8,300 crore, with payment delays of around four months.
Coal India, for one, supplies only 60 per cent of what is required under a long term PPA. Additional procurement of coal under e-auction is not compensated.
In this context, they have stresses that power generation companies are one part of the value chain. Supply of fuel asuch as coal, railway evacuation, transmission and distribution of power to consumers are all controlled by government agencies. Power developers have to pay in advance for coal procurement, its transportation to the generating unit and transmission of power. While payment from distribution companies takes four to five months.