Fin Min refuses to reveal names of NPAs in power sector 

The finance ministry keeps its secrets close. They don’t even want to share details with Parliamentarians. Officials from the department of financial services refused to divulge details of the 34 power sector projects, which have defaulted on bank loans, to the parliamentary standing committee on Energy.

One of the mandates of the Standing committee headed by K Haribabu is to look at the non-performing assets in the power sector. The 30-member committee, which includes Om Birla, Ram Jethmalani, Deepender Singh Hooda and Anil Kumar Sahani, grilled Girish Chandra Murmu, the additional secretary in the Department of Financial Services (DFS) about the non-performing power projects and the banks, which have financed them.

However, Murmu refused to divulge any details. According to sources, he said the department didn’t maintain a list of power projects which come under NPAs. The committee members were of the view that DFS had the authority to get data from financial institutions, RBI and banks.

Skimming over the issue, Murmu stated vague reasons such as delay in environmental clearances and issues of coal as the reasons for the non-performing assets.

“The finance ministry doesn’t want to divulge facts, but they can’t hide such details from the parliamentary standing committee, which is a mini parliament. They want to protect certain companies. That can be the only reason for such negligence,” said the source.

ICICI, Axis Bank, Canara Bank, Bank of Baroda, Central Bank of India, Bank of India, State Bank of India, Punjab National Bank and IDBI are among those banks, which have financed power projects.

“The Ministry of Finance should take the public and the Parliament into confidence on NPAs in general and NPAs in the power sector in particular, considering that some NPAs could involve outright fraud and siphoning off of funds,” said EAS Sarma, the former power secretary.

The steel and the power sectors contribute significantly to the rapidly worsening NPA crisis which has gripped the banking system, stated Sarma, while going on to elaborate the situation. According to an assessment made by a Pune-based NGO, Prayas, by 2011, MOEF had cleared or about to clear a total thermal generation capacity mostly coal-based that was thrice the capacity needed by 2032, as projected by the Planning Commission.

At a time when the generation mix had already become skewed in favour of coal-based generation, this accentuated the problem, leading to heavy idling of thermal generation capacity during the off-peak hours.

“Several of these private power projects ran into legal problems as, in the first instance, their locations were wrongly chosen and they violated the land-related laws. In addition, they faced operational problems as they had to remain idle for 40 per cent of the time. Some States, as a result of connivance with the private companies, accepted Power Purchase Agreements (PPAs) that allowed the companies to pass on their losses due to idling to the State distribution utilities but the problem of idling was far too serious to allow the States to bail out the private generating companies,” added Sarma. Private players such as East Coast Energy Pvt Ltd have abandoned their projects at Bhavanapadu in Andhra Pradesh after having encroached on a wetland.

Apart from this, several project promoters (Adani Power and Tata Power) having coal mines overseas offered fixed tariffs in competitive bidding but later, when the Indonesian government tightened its policy, reneged on their earlier offers and demanded upward tariff adjustment in violation of the tender conditions. There was protracted litigation that followed and the apex court disallowed their contention. This is being cited by the affected promoters as justification for their projects becoming unviable, though it is now in public knowledge that many among those promoters had also fraudulently over-invoiced the coal they imported.

A smaller portion of the thermal power generation capacity set up was based on natural gas, mostly from the Krishna-Godavari Basin. As a result of the pressure exerted by the private players, the then UPA government fixed an unconscionably high price for natural gas which in turn resulted in a high price of electricity for the State PSU electricity distribution companies, rendering their operations unviable.

Reliance Industry Ltd, which was developing the KG Basin failed to deliver gas at the guaranteed levels leading to interruptions to electricity supplies, largely in the southern States. Many of the private companies, such as GMR, Lanco and GVK, who set up gas-based power plants failed to repay loans and became NPAs. The gas companies that found favour with the earlier UPA regime continue to have a cosy relationship with the NDA government.

“The problem of power sector NPAs has been the outcome of indiscriminate clearances given to private players since 2003 and the successive governments conniving with them to commit fraud. There is no guarantee that the present government will deal firmly with the private players responsible for this situation, as some of these companies have since been allotted coal blocks during the post-2014 coal block auctions, which according to the NDA government's claim, were “highly successful”,” points out Sarma. Thus, the present NDA government has further compounded the problem of NPAs, rather than resolving it in a forthright manner.

Earlier, in response to a PIL filed by the Centre for Public Interest Litigation at the Supreme Court, the RBI had submitted a list of all the 57 defaulters in all the sectors, but had refused to release thier names into the public domain. NPAs of state-run banks alone at the end of last September rose to Rs 6.3 lakh crore.