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Mega relief for power sector Pariwartan scheme to protect value of assets

Published: Jun 21, 2018

By TIOLCORPLAWS News Service

NEW DELHI , JUNE 21, 2018: Aiming  to stem the rise in bad loans in the power sector, PM Modi plans to warehouse stressed power projects totaling 25,000 megawatts (MW) under Pariwartan' scheme. The process would take place under an asset management firm to protect the value of the assets and prevent their distress sale under the insolvency and bankruptcy code till demand for power picks up.

A total debt of around Rs 1.8 trillion has been identified by state-run Rural Electrification Corp (REC) as part of the scheme. The Pariwartan scheme is inspired by the Troubled Asset Relief Programme, or TARP, which was introduced in the US during the 2008 financial crisis.

Those stressed power projects would be housed under an asset management and rehabilitation company (AMRC) that would be owned by financial institutions. While the promoter's equity would be reduced to facilitate a transfer of management control to the financial institutions, the lenders would convert their debt into equity. The AMRC would manage the projects and may ask utilities such as NTPC Ltd to operate and maintain them. The AMRC would charge a fee and help complete projects that are stranded for lack of funds.  Issues faced by the stressed projects include paucity of funds, lack of power purchase agreements and fuel shortages.

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