Why is Finance Minister Arun Jaitley keen to save Adani, Tata and Essar power companies from Rs.35000 crores dues?

Is the SBI move to ask Supreme Court to write off Power Company loans an unhealthy trend?

Is the SBI move to ask Supreme Court to write off Power Company loans an unhealthy trend?
Is the SBI move to ask Supreme Court to write off Power Company loans an unhealthy trend?

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

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17 COMMENTS

    • Tks Kiranji, for your kind compliments. Having travelled to many countries and having interacted with many people. i always found deep respect for me being hindu and they heap compliments in indian culture.Everyone is unanimous that indians are intelligent,hard working and good at maths (meaning business). I enjoy answering their doubts and following are few questions which i clarified.
      1) who is guru and what is difference between guru and Sadguru——– by a lebanese christian lady executive.
      2) why do you pray to 1000 gods and not one allah———-by a Pak business executive
      3)Is it true that hindu boys and girls are not permitted to date——–by an african college girl.
      4) i love india though i never visited the place——-african meditation teacher.
      5) i love india because it is full of colours——-an american working lady.

      I find indians are being fed negative narrative in media, and more than the rural people, the urban educated class feel prey to such narratives. For example, cow eats grass and gives milk as well as urinates.The narrative we are fed is about cow urination and not about milk. If only one looks at milk side , you will notice india and its people ( hindus ) are not uncivilized in any profession ( few bad apples are there ) and are a devotional race.

  1. Let’s request Mr Subramanium Swamy to take up this, first with PM and then with SC. Quite surprising that Mr Prashant Bhushan, is also silent on this?

  2. who is arunjaitly to waive off the loan of big companies if he has any moral he should order all the educational loans given to students of poor family to be waived of full it may not be not even 5% of the loan amount of these profiteering organisation. However people has to teach this govt in the coming elections.

  3. Narendra D. Modi and Arun Jaitley should ADDRESS the nation, giving clear cut answers for the Questions and issues raised by the columnist and verified by an objective and impartial editor who has no axe to grind but holding a keen interest in the overall welfare of India. If this is not addressed by Arun Jaitley, we encourage Sree Iyer to bring out an e-Book entitled “The A- Company: Adani, Ambani and Arun Jaitley, the B-Team of UPA”. Mr. AJ who blogs swiftly in and out on unrelated topics to protect the interest of BJP should have the guts, courage and conviction to debate offer his rebuttal – replying to this column.

    • Tsk for your satire. I was once a major sub contracter to Shapporji Pallonji Middle East LLC. I appreciated their work ethics where payments were promptly made to sub contractors and to their employees. Though I never officially interacted with C Mistry, I once saw him visiting a site unannounced and his interaction with engineers. Frankly speaking I dislike N Tata who hardly owns 4% in TATA sons and contributed to foreign universities and foreign Cos to prop up his image.

  4. Arun Jaitely is biggest failure. My daughter’s educational loan for Rs 10 lacs is not processed even after 18 months inspite of giving verified legal gurantees of Rs. 60 lacs (house mortaged), but they want to waive Rs. 35,000 crores. Modi reliance on this Jaitely is foolishness & he has to bear the burden of failure. Modi & BJP can talk of cow, cow dung politics only & that seems to better area for them to work instead of country governance

    • Sir I can understand your pain. How can a FM be responsible for loans? NPAs have sharply risen against education loans as people are deliberately not paying them. If coercive action is taken, they say they are unemployed. Further bank deposits have steeply fallen. Because recoveries are taking time, banks may disburse loans as per norms for priority lending. Fault is with the customers who do not repay loans . Do not couple sector loans with power sector loans.

  5. A chai wallah has put a vakil wallah in charge of the country’s finance.
    Either or the chai wallah or the vakil wallah is a misfit or both are misfits.
    Everyone is entitled to their opinion.

  6. There is an excellent comment by JAYASANKAR V.
    These corporate thiefs have lavish life and extravagant expenses. They produce black money in purchases, in imports, in taking bank loans, in production, in salary distribution, in infrastructure maintenance and finally selling products. Similar with Banking structure, its full of corruption at all levels and all party governments have structure to absorb this corrupt money and rotten corporate driven scams.

    • Sir, if corporate is a thief, why don’t you buy a corporate house and run it honestly ? You say bankers are corrupt. Who made them corrupt ? I recount my discussion with a bank field officer who was extremely jealous of a customer who became a millionaire by sheer hard work. His comment was “ see this fellow, he became rich because of my money “. Another banker deliberately disbursed over draft late and the company gone bust due to labour trouble.

      India has largest number of advisors and paid commentators whose contribution along with administrators, advocates, journalists,Caine field,activists,hereditary politicians, teachers etc for wealth creation is ZERO. Indian wealth creators are agri people and corporates and in service sector like tourism and salaries of NRIs

      India is the only country where corporates are demonised and they are abused in public by non wealth creators. If corporate is a devil, which angel is going to give money to Indians? Even a beggar in US leads a better lavish life compared to Indian standards. He has a home, a car, pension, ration coupons and bindaas life. Lived amongst richest people in a City abroad. They lead very simple life. Cyrus Mistry the majority shareholder of TATA Sons ,drives his own car and his father the founder of the group is treated like God by his employees.

      Indians are a jealous breed with high level of egoism. They fight in offices, business houses, politics, MSM,sports,parliament, temples etc etc. The only time they won’t fight is during funerals. So for once why not we appreciate the corporates ?

  7. It brings to my notice an issue hotly debated during Vajpayee era. The Telecom Cos. started weeping then they bid at a higher price for the waves whereas they are NOT getting the requisite revenue from the Customers. So the Telecom Cos requested the then Vajpayee Govt to switch over from fixed tariff to Revenue sharing formulae, which Vajpayeeji agreed on the plea that those telecom Cos owes crores of rupees as loans to PSU Banks. The then Communication Minister Shri Jagmohan Malhotra did not recommend the pleas of those tel cos, because his argument was that had they earned more revenue, would they have shared the extra revenue with GOI or else give it back to the Telecom Consumers through reducing the rate. A FLAT NO. Secondly, those Telecom Cos VOLUNTORILY gave those tariff commitments before TRAI and they were NOT forced by the GOI to do so. So, Mr Jagmohan’s principled stand was that CONTRACTUAL AGREEMENT MADE BY THE PARTIES OUGHT TO BE FULFILLED. Those notorious Telecom Cos directly approached PMO by passing the then Communication Minister Shri Jagmohan, who was gentle, impartial and INCORRUPTIBLE because of his firm view. Finally, citing the specious plea of safeguarding the financial health of ever deteriorating PSU Banks, who lent crores of rupees as loans to those Telecom Cos, Mr Jagmohan was shunted OUT of Communication Ministry to Ministry of Culture and the GO GETTER Pramod Mahajan was entrusted with Telecom Ministry to find an “AMICABLE” settlement to the Telecom Cos woes. Even the then President of India Shri K R Narayanan called for Shri Jagmohan Malhotra, to hear him out fully on the Telecom imbroglio.

    Now, the present SBI’s self propelled hair cut / loan cut proposal to SC is more or less similar to the above situation. Now, Supreme Court should ask SBI as to why their Singapore Branch refused to share the details of Coal import handled by them during 2007-2009 period to Indian Customs investigative agency Directorate of Revenue Intelligence, these notorious Cos imported coal from Indonesia / Australia for pittance and changed documents to their shell Cos and got it billed for higher amount from their Shell Cos to their Indian locations in order to charge exorbitant Power Tariff. Had they passed on the benefit of lower import price of Coal to the Indian Electricity Consumers by suitably reducing their power tariff, now their present request certainly could have been considered.

    They NOT only, not passed on the the benefit of lower Coal import price, conversely they surreptitiously & deliberately increased the Coal import price by changing documents to their offshore shell Cos and from their they raised bills for exorbitant price for coal to their Indian establishment, although the Coal consignments originated from Indonesia. They have imported machineries for installation of Power generating plants by inflating their purchase prices manifold and also availed NIL customs duty under Power Project – Project Import regulations. When it comes to making unethical profit, they don’t think of Indian poor electricity consumers or the ever deficit Govt of India, but when it comes to getting relief, they resort to all kinds of nefarious designs to achieve their NOTORIOUS aims. Why should SBI voluntorily offer to take a hair cut / loan cut to these Cos – Tatas, Essars & Adanis, whose Group Cos are having enormous net worth, they can very well pay the borrowed loans with interest from their internal accruals. They don’t need any sympathy from any Indian Financial Institution, notably an already fledgling SBI with nearly 2.30 Lakhs Non Performance Assets. This will open up an pandora’s box for other notorious borrowers to seek remission of loans, euphemistically called HAIR CUT / LOAN CUT. I request all supervisory and investigative agencies like RBI, ED, CBI, CAG, DRI, MOF-Fin Services & Banking Supervision Division, PMO, to be vigilant to stop the mischief at the very initial stage itself. I hope, BJP’s Concise keeper & Ombudsman Dr Subramanian Swamy will keep an eye on this episode and RENDER JUSTICE.

    • Sir, your post indicates you have never done business in your life. Google ,you know world prices of Oil,coal,gold,copper,sugar etc etc. coal is available in US, Australia, S Africa, Indonesia,Russia etcetc.As the basic cost of coal is low ( also for metallic ores ) the freight rate will play a major role. Hence if world prices of coal are x dollars / ton, the landed cost depends on proximity of exporte to the power plant. Hence Indonesian coal cheaper. This is like cost of petrol which varies from city to city.

      While the power Cos get a fixed price for power/ unit, they have to bear the cost fluctuations in coal cost and freight cost. While petroleum Cos customers bear the cost fluctuation in crude, the power Cos do not enjoy such luxury.

      Every businessman pays mamools to officers and politicians from panchayat to multiple agencies . From where will he pay these mamools? Hence businessmen use devious methods ,not for making money but to survive. These techniques are not taught in management schools in India or abroad. Hence no foreign Co can have footing in India so is with start ups. I have seen businessmen from middle east running away from air port itself after being cheated by taxiwala.

      Indian businessmen are masters in under invoicing and over invoicing, again due to heavy pay offs to agencies. No customs bill of entry or export invoice is endorsed without a mamools. Even the peon has to be tipped. This is going on since 1947 and if Indian businessmen have a system like US or Singapore, even a pakoda seller can beat Steve jobs.

      How can RBI, CBI, ED,CAG and PMO gets involved in cases in foreign countries ? Study the drama going on in CBI. Unless morality and national spirit is established in the system, the country will move as it is moving now.

  8. Power companies are squeezed between coal cost, tariff fixed by govnt and non payment of dues by electricity boards. Worst fact is they are not allowed to shut. What will the owners do ?

    What happens if banks shut down the units ? First they cannot be revived, second 35,000 Cr gone and production loss of consumers will be in lakhs of crores. From a totality perspective AT ANY COST, a power Co should not be shut down. They are the major indirect wealth creators of a nation.No power Co makes any profit as such crony capitalism doesn’t apply to this industry.

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