Power play: on troubles of the power sector
The government should address the troubles of the power sector, but IBC must hold
The Allahabad High Court on Monday dismissed(खारिज कर दी) a plea(याचिका ) from private power producers seeking relief from an RBI diktat to banks to take cognizance(संज्ञान/हस्तक्षेप) of a stressed loan if repayments were missed even by a day. The RBI decision, of February 12, requires banks to complete insolvency(दिवालियापन) resolution(समाधान/संकल्प/प्रस्ताव)proceedings(कार्यवाही) within 180 days of defaults. Monday also marked the deadline for several cases in which loans were declared bad due to this regulation(नियमित करना). Across the banking system, about 70 firms with loans of around ₹3.8 lakh crore outstanding were expected to face insolvency proceedings. Thirty-four of the troubled(परेशान / तंग किया) accounts are from the power sector and constitute(गठित करना/जमा करना) nearly 54% (or ₹2.02 lakh crore) of banks’ exposure in these cases, according to the credit rating agency ICRA. A Power Ministry report suggests these power producers have planned generation(पीढ़ी) capacities (क्षमताओं)of 39 gigawatts, and are in trouble. This is due to a variety(कारकों ) of factors(विविधता):fuel shortages due to cancellation of coal block allotments(हिस्सा/आवंटन) or lack of supply linkages; absence(अनुपस्थिति/अभाव) of power purchase agreements signed by State discoms; and cost overruns due to delayed clearances. The promoters argued in court that most of the hurdles faced by the power sector were due to external factors and so they should be spared(बचाना/क्षमा करना) the insolvency stick.
Several bankers and even the government have expressed reservations about the RBI directive(निर्देश). With regard to the power sector, in particular, the worry among bankers is that a credible(विश्वसनीय) resolution plan may be difficult to construct unless key structural(संरचनात्मक) issues such as fuel supply and State discoms’ financial woes are fixed. To be fair, the power sector has been facing some of these issues since UPA-II. The UPA government had set up a project management group in the Cabinet Secretariat to steer stalled big-ticket investment projects out of regulatory landmines(भूमिमार्ग). The NDA government did its bit too, including an overhaul of the process for coal block allotments and the UDAY scheme to rev up State discoms’ finances. But the utilisation (उपयोगीकरण)rate of power plant capacities has been stagnant(स्थिर/मंद) at around 60%, indicating that more needs to be done by policymakers. Nonetheless, it is heartening that the High Court refused(अस्वीकृत) to entertain any obfuscation(घबराहट) of the RBI’s regulatory powers or of the sanctity of the Insolvency and Bankruptcy Code to deal with stressed(ज़ोर देनातनावग्रस्त ) assets(संपत्तियां). This should trigger a consolidation (एकत्रीकरण/समेकन) in the sector, possibly with deep haircuts for banks. Granting any relief would have led to pleas for exemption from other sectors too. The government should display greater urgency(तीव्र इच्छा/अति-आवश्यकता) in tackling systemic issues in different sectors, but there should be no deviation (विचलन ) from the IBC path it has embarked on to fix the banking stress, that is hurting the entire economy.
Important Vocabulary
1. Cognizance (संज्ञान/हस्तक्षेप)
Synonyms: attention, bearing, cognition, grasp, heed
Antonyms: disregard, heedlessness, ignorance, inattention, indifference
2. Troubled(परेशान / तंग किया)
Synonyms: agitated, anxious, bothered, concerned, confused
Antonyms: calm, certain, comforted, content, happy
3. Spared(बचाना/क्षमा करना)
Synonyms: afford, allow, give, grant, provide
Antonyms: deny, hold, keep, refuse, take
4.Obfuscation(घबराहट)
Synonyms: bafflement, bewilderment, confusion, discombobulation, fog
5. Deviation (विचलन )
Synonyms: aberration, alteration, anomaly, breach, detour
Antonyms: agreement, conformity, consistency, harmony, normality
6. Stagnant(स्थिर/मंद
Synonyms: dormant, idle, inactive, lifeless, listless
Antonyms: active, alert, busy, energetic, lively
7.Allotments(हिस्सा/आवंटन)
Synonyms: allocation, allowance, appropriation, quota, ration
Antonyms: whole
8. Directive(निर्देश
Synonyms: decree, edict, injunction, mandate, memo
Antonyms: disorganization, lawlessness, answer
