Study says 46,000MW of power projects in India at risk due to high debt

About 46,000 megawatts (MW) of power projects in India are at high risk as they lack a strong sponsor company support, a study has said.

The joint study by Assocham and CRISIL says that banks and financial institutions had lent about Rs 75,000 crore as on March 15, 2015 and these projects are not expected to turn viable in the long run even if they are structured under the 5/25 scheme. The release said non-performing assets (NPAs) from these accounts could be high in the medium term.

Out of the 46,000 MW, nearly 36,000 MW are coal-based and about 10,000 mw, gas-based. Loans to these projects are pegged at about Rs 2.1 lakh crore, out of which about two-thirds are lent by public sector banks.

The study believes nearly 20,000 MW of weak generation projects involving debt of Rs1 lakh crore can benefit from the 5/25 scheme in the medium term. Out of this 15,000 MW are coal-based. Some of these were operating at sub-optimal PLFs because of inadequate feedstock, but coal supplies are now improving.

They can further benefit from elongated loan tenures under the 5/25 scheme. Additionally, 5,000 MW of gas-based capacities, having been allocated subsidised RLNG in the recent round of auctions, will be able to service their interest obligations for the next two years, the release said.

Therefore, providing a moratorium on principal repayment under 5/25 until domestic gas production improves can provide relief to these projects, the release said. However, as per stipulation, for debt to be structured under the 5/25 scheme, banks will have to bring in an additional lender or ensure zero net present value loss. And the performance of projects, even after structuring, will be a monitorable.


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