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Home News Power Sector News Loan to Ratnagiri Power Project may become non-performing loan

Loan to Ratnagiri Power Project may become non-performing loan

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DabholThe Ratnagiri Power Project, the modern avatar of the maligned Dabhol Power Project, is in the news once again. The Rs 7,000 crore, which four large banks have lent it, has to be restructured by March 31 or there is a risk of the loan having to be booked as a non-performing loan. The good news is that work is at an advanced stage and if the Maharashtra government agrees to buy Ratnagiri's power at a 50% higher price and most likely, the restructuring will be through.

The beleaguered Ratnagiri Power Project will be rescued by the lenders. Bankers say they are in final stages to restructure the Rs 7,000 crore loans given to the project. They also say the loan has to be restructured before March 31 or it will become a sub-standard loan. The four large lenders to the project include IDBI, SBI, ICICI Bank and Canara Bank. Bankers say that Ratnagiri Project was considered as a standard asset under the Reserve Bank of India's (RBI) dispensation.

According to RBIs dispensation, infrastructure projects can be given up to two years from the date of commencement to make their repayment. The time has run out for Ratnagiri Power Project and it is time for them to be classified as a sub-standard loan. The key to the restructuring is that Mahavitaran or Maharashtra State Electricity Distribution Company Ltd (MSEDCL) will have to agree to a 50% higher price than the original price. The project will then become viable and if the loan is restructured before March 31, the Maharashtra government will have to come to the table through the consortium and agree to this higher price.

Sources say that the Maharashtra government is in broad agreement with the lenders to agree to this price. They have also agreed to get back to the lenders before March 31. If this does not happen, the loan will be classified as a sub-standard loan, which means the RBI will have to make a special dispensation to these lenders.

Both the central and the State government are working hard to ensure that the entire loan is restructured because of the huge amount of Rs 7,000 crore. Already the government has allotted [Reliance Industries] KG basin gas at a certain price to the Ratnagiri Power Project. This will ensure that the project is viable but the bone of contention now remains the Maharashtra government?s decision, whether to agree to this higher price. As far as lenders are considered, they are going to go ahead with the restructuring.

Source - CNBC

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