Bank recapitalization and the government’s thrust on bad loan resolution may give a fresh lease of life to stressed power plants. The question, however, is who would want to buy or run them? Of course NTPC Ltd is looking to buy stressed assets. But it reportedly has set quite a few conditions such as low project costs, domestic equipment, fuel linkages and compatibility with local coal, fulfillment of which can be a tall order. Further, despite all the talk, NTPC has largely kept to government assets (such as state utilities) in recent years. In short, the bad loan problem in the power sector may not be easy to resolve. While bank recapitalization sets the process in motion, the government or the regulator should follow it up with dedicated PPAs (at least for partial capacities), and force financial and ownership restructuring. That will help resolve the current impasse.

(Live Mint)