Banks stare at $38 bn new dud loans from power sector: Report

About 43 per cent of loans are extended to the power generation sector, followed by distribution at 37 per cent and transmission at 20 per cent, the report said. 

The banking sector, which is already reeling under a mammoth pile of bad loans, is looking at potential dud assets of USD 38 billion from the power sector, as USD 53 billion of the USD 178 billion bank loans to the sector are already stressed, said a report. 

"Of the USD 178 billion (around Rs 11.7 trillion) of debt of the power sector, USD 53 billion (around Rs 3.5 trillion) are already under stress (primarily to the generation sector) and of this, as much as USD 38 billion (around Rs 2.5 trillion) have the potential of being written-off as bad loans," the Bank of America-Merrill Lynch report said today. 

utors), 54 per cent is related to operations and maintenance/other expenses across the value chain (administration costs, employee expenses, taxes, marginal profits etc), fuel comprises only 20 per cent of the cost, borrowing cost is only 19 per cent and freight charges are at a low 7 per cent. And surprisingly subsidies to farmers constitute only 2 per cent of the cost of the states on a national level barring for Punjab and Haryana where its 7-8 per cent. 

Farmers are the second biggest consumer segment for the discoms with 22 per cent of total power consumption as agricultural power tariff is only Rs 1.7 per kilowatt hour (kWh) against the cost of Rs 6.3 per kwh. 

Though some states provide free power to farmers, the expenses are paid by the respective states to distributors from their annual budgets. "Our analysis suggests, while at the national level, power subsidy comprises 2 per cent of all states' annual expenditure, but for Punjab and Haryana, it 7-8 per cent," says the report. 

The sector has a USD 5 billion import bill as one-sixth of the fuel needs are met by imports. For power generation companies, this comprises USD 24 billion in annual costs, while coal accounts for 87 per cent of this cost. Besides, USD 4 billion of such fuel is imported which is around 5 per cent the country's non-oil and non-gold imports), comprising USD 3 billion of coal and USD 1 billion of LNG.