NEW DELHI: Deep in the jungles of eastern India lies an abandoned power plant, a warning symbol for the $38 billion of additional bad loans which are about to engulf the country’s banks.
Like many of India’s power stations, the Jharkhand project had all the markings of success when a group led by State Bank of India lent about $700 million five years ago to build it. There’s abundant coal and water in the area, a rail track was set to run through the premises, and its promise of 1,080 megawatts of electricity was alluring in a country that faces persistent power shortages and blackouts.
Yet today it stands deserted and Indian banks have had to write off three quarters of their loans. Haircuts of that magnitude are now expected across the whole power sector, which is still reeling from the 2014 court-ordered loss of coal mining permits, as well as financing and cash-flow concerns that make revival difficult.
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