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Govt mulls accounting tweak to aid power firms

business Updated: Sep 01, 2012 00:06 IST
HT Correspondent

In what may give a new lease of life to around 9,000 mw of power projects worth Rs 40,000 crore, hit by lack of fuel, the government is planning changes in the accounting standards for power companies to prevent them from defaulting on loans so that their stranded assets don’t turn into non-performing assets (NPAs).

Most of these power projects are ready for commissioning but are stranded for lack of fuel, and run the risk of becoming NPAs — assets that do not fetch returns to lenders. Banks are reportedly reluctant to extend credit to such power projects as this could result in defaults in the banking system.

“It is on serious consideration of both the ministries of power and corporate affairs,” union power minister Veerappa Moily said after a meeting with over 20 power producers including Reliance Power, Tatas, Adani, GVK, Lanco, Essar Power among others on Friday.

"The power ministry is reviewing the issue and would soon send the recommendations to the ministry of corporate affairs," he said. http://www.hindustantimes.com/Images/Popup/2012/9/01-09-biz3.jpg

Moily also assured that the government would take “quickest” possible decisions to address fuel shortages and other hurdles impacting the sector.

Speaking to reporters after the meeting, Moily said various issues related to production, transmission and distribution of electricity were discussed. These include fuel shortages, pending distribution reforms and ways to increase overall generation capacity.

According to Moily, private power producers sought priority status for power plants in allocation of gas. A slew of issues such as acute fuel scarcity, lack of regulatory clearances, poor financial health of distribution companies and tight credit flow for projects, are hurting the domestic power sector.

India has an installed generation capacity of over 2 lakh MW. In the XII Plan period (2012-17), most new capacity will come from private players.