India : Step up reforms in state power

There is path-breaking judicial action on stressed bank assets, especially power projects. Last week, the Supreme Court held the circular dated February 12, 2018, issued by the Reserve Bank of India (RBI) for resolving stressed assets, particularly in the vexed power sector, as ultra vires for technical reasons.

The way forward is to resolve nonperforming assets (NPAs) in the banking sector with follow-through action in the policy-challenged power sector, characterised by runaway losses of public utilities in distribution. There is routine delay and even non-payment for a large quantum of the power distributed nationally, thanks to political patronage, populism and even theft. What’s warranted is transparency in the finances of the state power utilities, so that the distribution utilities, or discoms, can draw power and pay for the energy consumed. It would lead to proactive resolution of the stressed power generation projects and, which, in turn, would reduce high NPA levels. The apex court held that the circular issued by RBI was beyond the scope of the powers given to it under Section 35AA of the Banking Regulation (Amendment) Act, 2017. The court averred that the section was amended in the 2017 Act to authorise RBI to issue clear-cut directives, pertaining to specific cases of default by particular debtors. It added that the RBI circular, instead, issued directives to debtors and loanee accounts in general, which was outside the purview of the law. Specific directives on distinct cases are now warranted.


Source :

Smart Grid Bulletin March 2019

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