Government may favour more time for stressed power companies.

Finance ministry recommends changes in RBIs circular ; Extension of Resolution period of 270 days against 180 days.

The government is likely to recommend that bankruptcy proceedings for stressed power plants should kick in after 360 days of default, giving relief to banks and companies that are struggling to meet the 180-day deadline set by the Reserve Bank of India in its controversial February 12 circular.

The power ministry and private power firms have demanded that stressed power projects should not be categorised as stressed in 90 days of default, while the deadline of 180 days to resolve a bad loan, be extended to 270 days. Stressed operational projects and those under execution may be recommended for an extra 180 days over and above the 180-day deadline.

Why it is important??

Power producers projects’ are stressed for the reasons not in their control,these include delays in land acquisition, green clearances, failure of Coal India to supply fuel and many factors that cannot be controlled by the firm. Hence, Government is making steps in favour of stressed power companies and banks by extending the default period to 270 days.

                            Image result for images on impact of RBIs circular for power companies

Its Impact??
Tata power co.Ltd. (CMP: Rs.69 , Market cap: Rs.18919 cr , PB :1.65x)
Reliance Power Ltd ( CMP: Rs.31 , Market cap: Rs. 8962 cr, PB: 0.8x)
Adani power Ltd.(CMP Rs.26, Market cap: Rs. 9758 cr, PB: 0.96x)

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