The banking sector wants some relief from the humongous pile of bad loans in the form of potential dud assets of USD 38 billion from the power sector, as USD 53 billion of the USD 178 billion bank loans to the sector are already stressed, said a report
“Of the USD 178 billion (around Rs 11.7 trillion) of debt of the power sector, USD 53 billion (around Rs 3.5 trillion) are already under stress (primarily to the generation sector) and of this, as much as USD 38 billion (around Rs 2.5 trillion) have the potential of being written- off as bad loans,” The Bank of America-Merrill Lynch report said today.
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The report further states that 71 gigawatts (gw) of private sector coal-based projects face the filings of bankruptcy at a number of NCLTs, which implies possible resolution from June 2019 and it expects an average 75 percent write-off in these loans.
It is notable that telecom, mining, roads, steel, and power have been the banks’ most stressed accounts with the burden of loan surpassing Rs 11 trillion or 10.5 percent of the system as of December 2017.
The national power utilities of value USD 116-billion lose approximately USD 9 billion annually. A turnaround is possible without any hike in the tariff and continuing the present average of 2 percent if the many of its cost-inefficiencies are resolved.
This kind of economic mayhem has been going in this country ever since Modi government has usurped power. It is commonly known that major political parties need lots and lots of money to keep their party floating. During the Congress regime, kickbacks cut money, bribes were the main features of hoarding money. This led to big scams and consequent unpopularity of the government and losing in elections. Modi government’s ploy of accumulation of wealth is different. They don’t want big scams! Thus, what they have done is that they secured loans of huge amounts in the name of the third parties and simply turned them into non-performing assets (NPAs). It is an open secret that these loans were granted to the respective parties due to political connections.
The menace of bad loans is reflected in every sector as in this case the power sector. The ruling party is getting away with it as no media platform so far has explained this phenomenon to the people. However, the heat is on with the common men as they are sufferers of unexplained charges and tariffs that is being a regular feature and has become the part and parcel of daily life.