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Power producers seek relief on funding issues




The Association of Power Producers (APP) has given a representation to Finance Minister Nirmala Sitharaman regarding funding issues in power sector.

The letter by Ashok Khurana, Director, Association of Power Producers (APP) has sought key financial support required for revival of the infrastructure industry.

“Unfortunately, the power sector, which would have a pivotal role in achieving the target of a $ 5 trillion economy by 2024, is presently suffering from stress due to systemic issues and is facing challenges with financing, thereby resulting in waning of investment appetite,” Khurana said in the letter.

APP has listed key initiatives on the financing side which, when coupled with policy and regulatory changes currently under consideration, can remove stress and re-energize the sector.

On Tap Targeted Long Term-Repo Operations (TLTRO) have been used by RBI to infuse infused liquidity of Rs 2.5 lakh crore through banks under this mechanism.

RBI has also allowed this facility to be exempted under the large exposure framework. However, Banks have restricted their funding to few corporates with high rating (AAA & above) or to sector specific industries like agriculture, MSME and pharma/healthcare.

APP said the pPower sector needs continuous investment in order to meet the new environmental emission norms and also for new projects in the Renewable sector.

Considering the severe liquidity shortfall affecting the power sector value chain, government had earlier announced a Rs 90,000 crore liquidity infusion package to the States to pay their dues, which was subsequently hiked to Rs 1.2 lakh crore.

However, only around Rs 31,000 crore has been disbursed to the States till date whereas on the other hand, the current overdue amount to generators has increased to approximately Rs 1.25 lakh crore as on September 2020.

“Considering the above issues faced by the power sector, we request GoI/RBI to undertake a specific TLTRO tranche of Rs 1 lakh crore focused on Infrastructure Companies with minimum investment grade rating. This will help power sector companies to meet their capex requirement for setting up new projects in the renewable sector, for the environmental emission control equipment and for their working capital needs,” APP said.

APP has also said that the proposed Development Finance Institution to fund infrastructure projects may be hastened to solve the infrastructure financing needs of the country.

Further, for this proposed DFI, the Govt should allow for a separate Credit Rating system, Expected Loss Method (ELM), which was evolved by a government appointed committee for infrastructure projects, needs to be adopted by CRAs as also lenders for rating of infrastructure projects and also for capital provisioning.

Stringent criteria of defining stress (like one-day delay in meeting debt servicing obligation which includes monthly interest) is not suitable for assessing loan quality of powers sector assets, considering the ecosystem in which it operates (long delayed payments from the procurers) and the long life of such projects. Such criterion makes it difficult for banks to fund power sector investments.

Banks, due to continuing stress in the power sector, are reluctant to fund the investment needs to meet the new environment rules for coal based power plants, where India needs around Rs 50,000 crore of investment for the remaining 120 GW of power plants which are yet to place FGD equipment orders.

It as suggested government should consider lowering of Risk Weights for Calculations of Capital Charge for Credit Risks from 100 per cent to 50 per cent in case of infrastructure loans & advances, giving tax breaks on Net Interest Margin (NIM) on infrastructure loans & advances and incentivizing banks to lend to Infrastructure companies through interest subvention.

Further, in order to incentivize local manufacturers like BHEL, L&T and also to implement ‘Atmanirbhar Bharat’ in power sector, government may provide Interest subvention scheme for local manufacturers as this will help the banks to lend to such companies to revive local manufacturing which has been subdued over the last few years due to low demand from the power sector, APP said.

RBI has been progressively tightening its NPA recognition norms, which needs to be re-examined to see if a lighter approach can be adopted for infrastructure sector. The need is to differentiate between a “good” borrower & a “wilful defaulter” & accordingly Banks can be given more flexibility in loan restructuring and provide support through mechanisms such as extended moratorium period and adopting sustainable interest rate regime.

APP has requested one-time restructuring of all accounts, which were ‘standard’ (i.e. overdue less than 90 days) as on March 1, 2020 and also permitting bilateral restructuring without insisting for Inter Creditor Agreement & escrow mechanism.

It has also sought measures on unlocking of funds stuck in arbitrations and receivables from government agencies.

One of the biggest challenges that has afflicted power companies are the large overdue of receivables pending over long time, including regulatory dues. Recovery of such dues are inordinately delayed due to multiple litigations by the DISCOMs as a strategy to delay their payment obligation.

Orders issued by regulatory forums are challenged as a matter of routine and honouring directions for interim payment issued by regulatory commissions are rare; even such orders from appellate tribunals are not adhered to in many cases and mostly end only at Supreme Court.

“A mechanism or policy framework needs to be formulated, in lines of MSME Act & Consumer Dispute Resolution Act, wherein at least 75 per cent of the claim amount has to be paid by any party in order to file an appeal challenging the orders of regulatory commissions. The amount can be adjusted in future once the final judgement from higher courts are given.

“This becomes essential to stop frivolous appeals, provide some sanctity to the Orders of the tribunal/Commissions, eliminate the inordinate delay in realising the money and huge relief to the cash strapped infrastructure sector,” APP said in the letter to the Finance Minister.


Indian economy exhibited stronger pick up than expected: RBI Governor




The Indian economy has exhibited stronger pick up in momentum of recovery than expected, said Reserve Bank of India Governor Shaktikanta Das on Thursday.

Addressing the 4th Annual Day of Foreign Exchange Dealers’ Association of India (FEDAI), he cited that a multi-speed normalisation of activity in Q2FY21, after the country witnessed a sharp contraction in GDP by 23.9 per cent in Q1FY21.

“Even as the growth outlook has improved, downside risks to growth continue due to recent surge in infections in advanced economies and parts of India,” he said.

“We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the vaccine.”

Besides, he said that monetary policy guidance in October emphasised the need to see through temporary inflation pressures and also maintain the accommodative stance at least during the current financial year and into the next financial year.

“A key source of resilience in recent months has been the comfortable external balance position of India supported by surplus current account balances over two consecutive quarters, resumption of portfolio capital inflows on the back of robust FDI inflows, and sustained build-up of foreign exchange reserves,” he said.

“The Government’s recent policy focus to enhance India’s participation in global value chains, including through production linked incentives for targeted sectors, can leverage on the strong external balance position of India.”

On the financial markets, he said conditions were benign at the start of the year but witnessed severe stress and dislocation as the Covid-19 pandemic unfolded.

“The Reserve Bank acted proactively and nimble-footedly to ease financial market conditions and mitigate risks with a slew of conventional and unconventional measures. Market participants responded with alacrity and together we have been able to ensure stable and resilient markets across all segments,” he said.

“The Reserve Bank remains committed to fostering orderly functioning of financial markets and will continue to evaluate incoming information having a bearing on the financial markets and act, as needed, to mitigate any downside risks.”

Furthermore, he cited that Reserve Bank has taken steps to usher in the next phase of reforms to accelerate the pace of financial markets’ liberalisation.

“The broad approach driving the recent regulatory initiatives is that any person with a need to access financial markets should be able to do so with ease at minimum cost. Principle-based regulations for interest rate derivatives and foreign exchange derivatives aim at achieving this broad objective,” he said.

“Users with limited or small hedging requirements have been allowed to enter into contracts equivalent of USD 10 million without the need to establish the existence of underlying exposures.”

In addition, Das said that as a major milestone towards opening up of markets, banks in India have been permitted to deal in the offshore rupee derivative markets.

“The measure is expected to reduce the segmentation between onshore and offshore markets, apart from reducing volatility and the cost of hedging. Banks have also been permitted to undertake foreign exchange transactions beyond the usual onshore market hours, thus fostering real time market activity,” Das said.

“In a complementary measure, exchanges and banking units in the GIFT City have been permitted to undertake Over the Counter (OTC) and exchange traded rupee derivatives.”

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SpiceJet launches dedicated freighter services to Leh




Airline major SpiceJet on Thursday launched dedicated freighter services connecting Leh with the rest of the country.

Accordingly, the airline operated its first freighter flight from Delhi to Leh carrying 13 tonnes of cargo supplies.

The flight was operated by SpiceXpress, the dedicated cargo arm of SpiceJet.

According to the airline, a Boeing 737 freighter has been deployed on this route.

Besides, the new flights launched are seasonal and will operate during the winter months when surface transportation is disrupted owing to harsh weather conditions.

“Our flight services are especially significant considering the extreme weather conditions during winter months when temperatures fall below sub-zero levels hampering the movement of essential supplies and cargo for the local populace and administration in Leh,” said Ajay Singh, Chairman and Managing Director, SpiceJet.

“Our freighter services to Leh will ensure seamless and timely transportation of essential supplies to this most beautiful part of our country throughout winters.”

In addition, the airline said that the dedicated cargo flights will help transport fresh fruits, vegetables, flowers, perishables, pharmaceuticals, medical equipment, and other general cargo. Besides improving logistics and connectivity, the new freighter service will ensure transportation of these essential commodities remains unaffected due to dipping temperatures and adverse weather conditions during these winter months.

At present, SpiceJet operates a fleet of 17 cargo aircraft including three wide-body planes and is the only Indian carrier to operate long-haul non-stop cargo flights to Europe, Africa and CIS countries.

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International flights to remain suspended till December 31




The Centre on Thursday extended the suspension of scheduled commercial international flight operations to and from India till December 31.

“This restriction shall not apply to the international all-cargo operations and flights specifically approved by the DGCA (Directorate General of Civil Aviation),” an official statement said on Thursday.

“However, international scheduled flights may be allowed on selected routes by the competent authority on a case to case basis,” it added.

At present, India has entered into ‘Air Bubble’ agreements with several countries.

This type of arrangement allows nationals of both the countries to travel in either direction.

Passenger air services were suspended on March 25 due to the nationwide lockdown to check the spread of Covid-19.

Domestic flight services, however, resumed from May 25.

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