The villains in the power sector’s tale of woes haven’t changed in a while: worsening asset quality and rising non-performing assets (NPAs). The gloom is despite the government’s and the Reserve Bank of India’s moves to ease the pressure on banks through strategic debt restructuring. 3 steps can help the stranded capacities from becoming NPAs. First, stricter regulations are necessary to discourage load-shedding by discoms and to ensure quality, universal power supply to meet the 24×7 goal. Second, the issue of non-signing of PPAs by discoms can be solved through centralized procurement and allocation of capacity to states—as has been done in renewables. Third, along with centralized procurement, the government should consider a SHAKTI scheme (second round) for constructed plants without fuel linkage so that they, too, can actively participate given the comfort of fuel source.  These steps can help minimize NPAs and haircut levels for banks, and also provide a signal to new investors who haven’t put money into the conventional power sector for more than three years.

(Live Mint)