The revival of the Dabhol power project marks the Centre’s resolve to salvage stalled projects to speed up economic activity. Major lenders — such as SBI, ICICI Bank and IDBI Bank — which have a cumulative exposure of ₹8,000 crore, stand to gain from the revival of the project.

Bloomberg TV India caught up with SBI Managing Director Rajnish Kumar to get some perspective of the Dabhol resolution and what the revival means for lenders.

Clearly, the stalled Dabhol Power Plant has been a big worry for a lot of lenders for years. Does Power Minister Piyush Goyal’s announcement, that Dabhol will start producing power from November, bring some bit of relief for large lenders like SBI?

Yes, it is a win-win situation for everyone, not only lenders.

This is a wonderful asset for the whole power sector.

For very high imported gas prices the economics was not working out.

But now, with the split into LNG terminal and power plant separately, the LNG terminal capacity can be fully utilised once its capacity is raised to 5 million tonnes per annum.

And, with the drop in imported LNG prices, as well as the support from the Power Ministry’s Power Sector Development Fund, the pricing of power has also become affordable and more or less in line with the power produced by thermal power plants.

So I think it is a very welcome development and not only to lenders but overall — the investment climate will improve.

It shows that it requires some patience, it requires some give and take from all stakeholders and then in the end everybody will emerge as winners.

Would it be fair to assume then that both these plants will get functional again? So, as these two units get back on track, is it fair to assume that principle repayment from Dabhol should start?

Yes, whatever financial modelling has been done for the LNG terminal as well as the power plant, the viability study has been done based on some assumptions and based on those assumptions the repayment schedule has been drawn up.

And, as per the repayment schedule, if all goes well, there should not be a problem.

Just to clarify, what kind of exposure are we actually talking about to this power project?

I don’t have the current number but I think lenders have an exposure of about ₹6,000-7,600 crore, which will be split between the power plants and the LNG terminal.

You don’t have the exact SBI component in that breakup?

No, I don’t.

The other interesting bit is what the government has actually been saying over the last couple of weeks and we have been picking up. Clearly, there seems to be intent to start reforms in the power sector. Can you give us a perspective? How are you reading these steps that the government is trying to take, in terms of the power sector? Are you seeing some bit of action there and are we likely to see some relief, at least when it comes to the loans that have come under stress in the power sector?

Yes, from the beginning I have been somewhat more optimistic than others as far as the power sector is concerned.

So the fuel supply issue, if you see, has largely been sorted out.

There is no shortage of coal and gas. We are also helped by the declining prices of imported LNG. Even the domestic gas prices have been reduced by 18 per cent.

The only issue that remains in question as far as demand is concerned is, in many parts of the country there are still long power cuts of 10-18 hours.

So demand is very much there, generation capacity is very much there, fuel supply is there, so the only issue which remains and the most complicated issue is about discom reforms and their financial health. And I think if the interest is there and this country’s 21st century dream of 24X 7 power to all is to be fulfilled, discom reforms have to happen.

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