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Table of Contents
Capacity additions and supply
Timely, effective implementation of measures to address key issues critical to resolve power sector mess
The government has initiated several measures to alleviate stress in the power generation segment. The most recent being theScheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI) policy, which aims at removing fuelsupply bottlenecks by providing coal linkages to plants having a Letter of Assurance (LoA). This would keep their generationcost low and ensure increased plant availability with assured fuel supply. However, availability of fresh power purchaseagreements (PPAs) and discounting on existing PPA tariffs are key monitorables. The flexible coal utilisation policy for stateand central generation plants notified earlier in May 2016 has also brought down the fuel cost, which is evident from thereduced average generation cost of National Thermal Power Corporation Limited (NTPC) plants at Rs 1.94 per kWh in fiscal2017 compared with Rs 2.01 per kWh in fiscal 2016 owing to improved coal quality and supply.
The government is also looking to set up a holding company (termed as National Asset Management Company (NAMC)) foridentified stressed assets, with the help of NTPC, Power Finance Corporation (PFC) and Rural Electrification Corporation(REC) besides banks, that will auction stressed plants or lease them on contract basis after the lenders take control ofmanagement. However, the lenders and promoters will have to take significant haircut through debt-equity swap. On the otherhand, the RBI has issued notification on Resolution of Stressed Assets - Revised Framework that mandates banks to classifydebt as default in case of even one day's delay in servicing the debt. As per the revised framework, projects with interest orprincipal overdue starting from 1 day to 30 days will be categorised as special mention accounts category - 0. The moststringent change in the framework is that all the lenders have to agree upon a resolution that has to be reached in 180 days.The new guidelines are likely to add further stress to the sector.
However, timely and effective implementation of these measures are critical for any improvement in the sector.