Punjab Government Provides Funds for Banks to Acquire GVK’s Power Plant

The Government of Punjab has successfully paid ₹1,426 crore to banks, led by IDBI, to acquire the debt-ridden 540-MW GVK Power's Goindwal Sahib thermal power plant. The banks received the payment on Feb 6 night, which amounted to 43% of their principal dues, including pass-through payments that were stuck due to litigation between the plant owners and the government. This payment had a positive impact on the bank's bottom line in the fourth quarter.

The government has also paid some receivables that have boosted recovery. IDBI Bank is the largest beneficiary, receiving ₹306 crore, followed by Punjab National Bank (PNB), which received ₹165 crore. Union Bank of India and Axis Bank are the other top lenders to the account.

The project was one of many coal plants that became an NPA after the government canceled coal allocations in light of a Supreme Court order quashing 214 blocks in September 2014. The project was initiated in 1994 and had an agreement with the Punjab State Power Corp (PSPC) to supply power for 25 years.

However, the project failed to take off due to problems regarding coal availability. The total admitted claims amounted to ₹6,584 crore, including ₹650 crore in receivables from the PSPC. Lenders have received some of these receivables with the settlement.