The Central Government and State governments stand exposed for colluding with power producing corporate houses. In a bid to save the ailing power companies, the State Bank of India (SBI) suo moto approached the Supreme Court of India saying that they are ready to waive the huge dues of Adani, Tata and Essar Groups’ power producing companies in Gujarat. The total amount owed? More than Rs.35000 crores! On Monday (Oct 29) the Supreme Court’s Bench headed by Justice Rohinton Nariman told the SBI and others to present their arguments before the Regulator Central Electricity Regulatory Commission (CERC).

SBI’s unsolicited affidavit filed previous week came after Supreme Court in April 2017 disallowed the power generating firms from increasing their tariffs and ordered to stick to promised tariffs in the agreement with the State Governments. The SBI was roped in to save the loss of power companies, which were barred by SC from increasing tariff.

Here is crony capitalism at its best. After the SC Judgment, Gujarat Government formed a Study Committee headed by retired Judge Justice R K Agrawal to look into the crisis in the power sector. This formation of the Committee was considered as an attempt by the government to save the ailing power companies after SC rejected their demand to increase the rates. The Committee in September 2018 suggested two recommendations to the government after consulting all stakeholders and the bankers. The recommendations were that ailing power firms can be saved either by increasing the tariffs or bankers offer concession or a haircut on the huge dues of the companies. Sources said that the Agrawal Committee noted that the bankers were “willing to take a haircut” considering the existing scenario in the power sector.

The SBI affidavit shows that they got clearance from the Central Government to waive the Rs.35000 crores dues of these big three corporate houses. “In order to take care of the interest of the consumers, as also Banks, a meeting was held by the Government of India under the leadership of the Hon’ble Finance Minister, Mr. Arun Jaitley. The meeting was attended by the representatives of all stakeholders including State Bank of India. It was resolved in the meeting that an early resolution should be explored in order to ensure that the power plants continue to remain in operation, the debt due to banks is not at a risk and the consumer’s interest is also safeguarded. The Government of India recommended the formation of a High Power Committee to suggest a resolution of the issues. Pursuant to the said meeting conducted by the Hon’ble Finance Minister, a High Power Committee was constituted by the Government of Gujarat headed by Retired Judge of Supreme Court and SBI Caps was appointed to provide secretarial support to the High Power Committee,” said the affidavit that SBI submitted to save Adani, Tata and Essar power companies. Why is Arun Jaitley so concerned about the plight of Adani, Tata and Essar companies? Why is he forcing SBI to bear the Rs.35000 crores burden? Would you like to answer that Mr. Jaitley?

It is interesting to note that at present SBI is facing more than Rs.2.3 lakhs bad debts. In its affidavit to Supreme Court, SBI said that Adani Power in Mundra owes them Rs.19127 crores and Essar Power Gujarat Ltd owes Rs.4214 crores and Tata Group’s Coastal Gujarat Power Ltd owes Rs.10159 crores to them. In April 2017, the Bench headed by Justices P C Ghose and Rohinton Nariman rejected the demand of the power companies to increase the tariff. Power companies claimed that due to problems and change of rule in Indonesia, the coal import became costly and this scenario must be treated as an unforeseen and force majeure incidents. Rejecting all these arguments, the apex court said that the companies must supply power in the tariff specified in their agreements with the states.

“It is relevant to point out that the entire net-worth of the three power producers has almost eroded. The monies lent and advanced by the SBI and other banks are at serious and imminent risk. So far as Essar Power Gujarat Ltd is concerned, it is already NPA (Non-Performing Asset). The other two companies (Adani & Tata) are servicing their debt but have been addressing letters that they would be constrained to stop operation since they cannot continue to run the plants at loss,” said SBI in its affidavit to SC, expressing their willingness to forgot total dues of more than Rs.35000 crores.

“That these issues with regard to the tariff have been pending for a long time and Banks have reached a stage that they are facing a huge risk of the public monies advanced to the power projects,” said the SBI. This move of SBI is seen as a test case to know the mood of the apex court and seeing the SC’s order on this regard. If the apex court agrees to SBI’s demand, many PSU banks would approach the court with similar petitions to favour the power firms across India.

A similar kind of situation is happening at the power companies in Punjab, Haryana, and Maharashtra. So after this clever but unhealthy move by Arun Jaitley, now many corporates and other banks will follow this method of appointing some pliable retired judge headed committee and the government will instruct the banks to bear the burden of the power producing corporate houses.

Most of the power producing companies are in the Coal Import Scam, which caused a loss to the exchequer of more than Rs.30000 crores. PGurus had reported the murky role of SBI in protecting these companies by not providing details to Directorate of Revenue Intelligence (DRI)[1]. DRI also caught Adani and Essar for more than Rs 10000 crore over-invoicing in the import of Power plant machines.

References:

[1] Is Arundhati Bhattacharya protecting Coal importers who indulged in over-invoicing? Jul 23, 2016, PGurus.com