Jhabua Power had originally envisaged the project to have a capacity of 1,260 MW, comprising phase-I, with a capacity of 600 MW and phase-II, with a capacity of 660 MW. A memorandum of understanding (MoU) to this effect was signed with the government of Madhya Pradesh, which took a share of about 35% in the capacity from the project, according to a petition filed in 2016 by Jhabua Power with the Madhya Pradesh Electricity Regulatory Commission (MPERC). According to the petition, phase-II had not received fuel linkages and financial closure could not be achieved for the second phase.

Among the other lenders to the project were Bank of India (Rs 221 crore), Corporation Bank (Rs 175 crore), Life Insurance Corporation (LIC) of India (Rs 180 crore), Punjab National Bank (Rs 175 crore), State Bank of Patiala (Rs 140 crore), UCO Bank (Rs 215 crore) and Union Bank of India (Rs 342 crore). Assets in the power sector have of late become a cause of concern for banks as a lack of power purchase agreements (PPAs) and other structural issues has led to many of them defaulting on loan repayment obligations.

On May 5, FE had reported that lenders to thermal power projects had decided to assign rating agencies to determine the “sustainable debt” levels of completed plants with existing PPAs and coal supply arrangements. Companies whose power projects would be rated by credit rating agencies include KSK Mahanadi, India Bulls, GMR, Avantha, Essar and Lanco.

Despite these measures, bad loans from the power sector may rise. Earlier this month, Union Bank told analysts that it may see slippages worth Rs 5,000-6,000 crore in the power sector in FY19.