In the past few years, a major shift has taken place in the power sector on several fronts including environment clearance, national forest policy, coal mining regulation, power purchase agreement (PPA), fuel supply agreement (FSA) and policies of financial institutions. In India, the shift started with Electricity Act, 2003 which unbundled the State Electricity Boards in three separate companies for generation, transmission and distribution along with delicensing the thermal power sector giving a free hand to private companies to expand power projects. This model was imposed by the World Bank which aimed to bring the private companies into the safer and profitable zones. 

These changes have pushed for privatisation in the power sector favouring the big companies often going against the interest of people. The private developers setting up thermal power plants took undue advantage of the situation and  forced the state power utilities to sign PPA for a period of 25 years with a deemed generation clause, where this clause forced the power distribution companies (Discoms) to pay for the power that they may not consume during the lean periods. These thermal power plants are spread all over the river basins across India and have been grabbing the land and forests for the projects and mining. There is a fight to control the natural resources of the country whether it is land, forests, minerals or rivers. The coal-based power projects apart from causing massive displacement also hugely impact the livelihoods of communities, who in most cases are farmers, Adivasis and Dalits. These projects also adversely impact the environment causing serious health concerns for people and destruction of ecology. The energy needs of urban India is being fulfilled at the cost of land and livelihoods of rural communities.

The expansion of power projects is not only affecting the environment and natural resources but also robbing the public of their own money through companies taking huge loans from the banks for these projects and not repaying them. However, this robbing of public money is not limited to the power sector alone. Currently, the Indian banks are facing a financial crisis due to a staggering amount of stressed assets (Gross NPAs + Restructured Advances). Indian banks’ gross Non-Performing Assets (NPAs), or bad loans, stood at Rs 10.25 lakh crore as of 31 March 2018. Last quarter, the pile has grown by Rs 1.39 lakh crore or 16 per cent from Rs 8.86 lakh crore as on 31 December 2017.  In the RBI’s Financial Stability Report, the apex bank said that the Gross NPA (GNPA) ratio of Scheduled Commercial Banks (SCBs) is likely to rise in the current fiscal. 

The problem of NPAs in power sector was highlighted in 2017 through two key power projects – Coastal Gujarat Power Limited (4000MW) owned by TATA Power and Adani’s Mundra Thermal Power Project (4660MW), which were incurring massive losses and asked the state government to bail them out. The trend of the government bailing out private companies with public money is growing day by day. In March 2018, a report was published by the Parliamentary Standing Committee on Energy to focus on the ‘Stressed/Non-Performing Assets’ in the electricity sector. The committee identified 34 thermal power projects worth Rs. 1.74 lakh crore were on verge of becoming NPAs. It is worthwhile to note that out of these 34 thermal power plants, 32 power plants belonged to the private sector, while only two were from the public sector. Apart from that, the committee highlighted that Stressed Assets were around 17.67% (Rs. 98,799 crores) of the total advances in the thermal power sector.

These projects have been given loans in tune of lakhs of crores rupees by Indian banking and non-banking institutions. The current government made a number of unsuccessful attempts to resolve this mounting financial crisis, including a number of mechanisms such as Insolvency & Bankruptcy Code (IBC), Bad Bank Formula, Project Sashakt, etc. Now the government has set up a committee headed by cabinet secretary to look into the matter. It raises the questions on the intentions of the government whether they really want to resolve this or making some visible attempt due to an upcoming election.

The consequences of this situation are that the stressed assets of banks are compounding due to the haphazard expansion of projects by power companies, which are eventually being bailed out by the government through public money. On the one hand private companies are robbing the public money and on the other hand, they are ignoring the social and environmental impacts of these projects.

One Comment, RSS

  • Rural Reconstruction and Development society

    says on:
    August 26, 2018 at 9:05 pm

    The Power Sector particularly Thermal Power Coal based encouraged Govt of India and State Govts. IN Andhra Pradesh Costal area day to day this Power Plants impact suffering rural community Dalits, Tribals, Small and Marginal farmers.They have Lossed Livelihoods, Employment, lands belongs agriculture Forest Lands an Costal alnds, The fisherfolk suffring due lack fish. There is urgent need to aware , Organise the communites and capacity building of Peoples organissations to save thier nature, Livelihoods and Right live and work is our Fundamental Right, Loooking for ward to ur response our mail rrrds111@gmail.com With Regards, V.G.Reddy

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On October 31, 2018, the U.S. Supreme Court will hear the landmark lawsuit, filed by the villagers of Mundra, challenging the absolute immunity of powerful institutions like the World Bank Group. The villagers are affected by the coal-fired Tata Mundra Ultra Mega Project, which was partially funded by the International Finance Corporation, the private sector arm of the World Bank.

This will be the first time the US Supreme Court will address the scope of international organisations’ immunity.

Visit here to know all about the case.