Energy crisis in India
- 3. INTRODUCTION Concept: an energy crisis is any great bottle neck or price rise in the supply of energy resources to a country. Representation: oil crisis, petroleum crisis, energy shortage, electricity shortage or electricity crisis. Energy crisis does not mean the scarcity of energy, the meaning of energy crisis is the problems of production and distribution for any reason. Energy Crisis = Demand of energy >> Supply of energy
- 4. What causes an energy crisis? • Demand-side: • Over-consumption due to energy inefficiencies, India's consumption of energy, is three times more than developed countries for the same quantity production. • Overpopulation, the rise of the middle and high-class people increases the energy demand • Due to climate change, more energy is needed for cooling and warming of home. • Supply-side • Political crisis in OPEC countries • US sanctions on Iran, Russia, and Venezuela (recent ) • The cartel of OPEC countries • Overexploitation of resources leads to a loss of resources.
- 5. There is three energy crisis since the industrial revolution. • The energy crisis of 1973: The main cause of the 1973 energy crisis was OPEC. In 1960, OPEC was formed to control the pricing. In 1973, the petrol price was raised from 1.5 $ per barrel to 7 $ per barrel, 5 times. In 1980, the price further rose to 25 $ per barrel. • The energy crisis of 1990: Second energy crisis, 1n 1990 Iraq invaded Kuwait, due to this oil crisis happened. • The energy crisis of 2005-08, the third energy crisis, in 2005 petrol price 78 $ per barrel, in 2008, it was 148 $ per barrel. It caused by two reasons: • Supply cut by OPEC countries • Demand increases by developing countries such as the rise of China & India.
- 7. THE CURRENT ENERGY SITUATION IN INDIA India is a rapidly growing economy which needs energy to meet its growth objectives in a sustainable manner. The increasing energy requirements coupled with a slower than expected increase in domestic fuel production has meant that the extent of imports in energy mix is growing rapidly. India has a population of over 130 billion with 70% of total population living in rural areas. Out of these , 396 million ie ; 44.7 % of total population does not have access to to electricity. The same for urban areas is 7.3 %
- 8. 592 million ( rural – 62.5 % , urban - 20.1 %) still use firewood for cooking Majority of the people residing in rural areas are still dependent on non-commercial energy sources such as fuel wood, crop residue, and animal waste for their energy needs. The use of biomass for cooking also contributes to the indoor air pollution , which cause 488.200 deaths in 2004. The installed power capacity of power plants in India 1,90,593MW ( including 22,252MW from renewable energy ). The gross electricity generation in our country during 2011-12 was 798.9 billion units, including imports from Bhutan. In 2011-12 the energy deficiency stood at 8.3% ( 782124 < 853324 ) Even in 2018-19 the peak power deficit of India stood at 0.8% and the overall energy deficit was 0.6 %. This was against the load generation balancing report of the CEA which predicted a peak power surplus of 4.6%
- 12. How can we solve the energy crisis? • Uses of an energy-efficient tool such as 5-star electronic items • Regular servicing of machinery • People awareness about energy importance • The exploitative nature of OPEC must be stopped. • Finding alternative of petrol • Must invest in renewable energy infrastructure, for examples FAME India program • Stability should be insured in oil-rich countries.
- 13. Seminar topic 2 :
- 14. What is an asset for a bank? Asset means anything that is owned. For banks, a loan is an asset because the interest we pay on these loans is one of the most significant sources of income for the bank. When customers, retail or corporates, are not able to pay the interest, the asset becomes ‘non-performing’ for the bank because it is not earning anything for the bank. Therefore RBI has defined NPAs as assets that stop generating income for them. Non-Performing Assets (NPA) NPA expands to non-performing assets (NPA). Reserve Bank of India defines NPA as any advance or loan that is overdue for more than 90 days. “An asset becomes non-performing when it ceases to generate income for the bank,” said RBI in a circular form 2007. To be more attuned to international practises, RBI implemented the 90 days overdue norm for identifying NPAs has been made applicable from the year ended March 31, 2004. Depending on how long the assets have been an NPA, there are different types of non-performing assets as well.
- 15. Categories of NPA There are different types of non-performing assets depending on how long they remain in the NPA category. a) Sub-Standard Assets An asset is classified as a sub-standard asset if it remains as an NPA for a period less than or equal to 12 months. b) Doubtful Assets An asset is classified as a doubtful asset if it remained as an NPA for more than 12 months. c) Loss Assets An asset is considered as a loss asset when it is “uncollectible” or has such little value that its continuance as a bankable asset is not suggested. However, there may be some recovery value left in it as the asset has not been written off wholly or in parts.
- 16. NPA Provisioning Keeping aside the technical definition, provisioning means an amount that the banks set aside from their profits or income in a particular quarter for non-performing assets; such assets that may turn into losses in the future. It is a method by which banks provide for bad assets and to maintain a healthy book of accounts. Provisioning is done according to which category the asset belongs to. The categories have been mentioned in the above section. Not only the type of asset, but provisioning also depends on the type of bank. Like, Tier-I banks and Tier-II banks have different provisioning norms. What are the reasons for NPA? The factors that are contributing to NPA are poor loan management policy, improper credit appraisal, business failures, poor recovery of receivables, sluggish legal system, industrial recession, and adverse exchange rates etc.
- 17. GNPA and NNPA Banks are required to make their NPAs numbers public and to the RBI as well from time to time. There are primarily two metrics that help us to understand the NPA situation of any bank. NPA numbers for a bank will be mentioned in the standalone financial statements of a bank. GNPA: GNPA stands for gross non-performing assets. GNPA is an absolute amount. It tells you the total value of gross non-performing assets for the bank in a particular quarter or financial year as the case may be. NNPA: NNPA stands for net non-performing assets. NNPA subtracts the provisions made by the bank from the gross NPA. Therefore net NPA gives you the exact value of non-performing assets after the bank has made specific provisions for it.
- 18. NPA Ratios NPAs can also be expressed as a percentage of total advances. It gives us an idea of how much of the total advances is not recoverable. The calculation is pretty simple: GNPA ratio is the ratio of the total GNPA of the total advances. NNPA ratio uses net NPA to find out the ratio to the total advances.
- 19. NPAs IN INDIA
- 20. What were the reasons behind the rise of Non Performing Assets in India? 1. In the period from 2004 to 2009, there was a huge growth in the economy, which led to firms taking bank loans very aggressively. 2. Most of the investment was in infrastructure sectors like roads, power, aviation, steel 3. Laxity in lending norms by the banks, without analysing the financial health of the companies and their credit ratings 4. The banning of mining projects, delay in environment permit, led to a rise in prices of raw materials and a big gap in demand and supply thereby affecting the power, steel, and iron industries. This affected the capacity of the companies to repay the loans to banks which resulted in Non-Performing Assets (NPA).
- 21. What are the impacts of Non-Performing Assets (NPA) 1. Banks won’t have sufficient funds for other development projects which will impact the economy 2. To maintain a profit margin, banks will be forced to increase interest rates. 3. Due to the curb in further investments, it may lead to the rise of unemployment.
- 22. Measures Details Debt Recovery Tribunal (DRT) – 2013 1.It was set up to reduce the time required for settling cases 2.Governed by Recovery of Debt due to Banks and Financial Institutions Act, 1993 3.Insufficient numbers, hence cases are pending for longer durations. Credit Information Bureau (2000) 1.This step is to prevent NPA’s by sharing of information on wilful defaulters ARC (Asset Reconstruction Companies) 1.Recovering value from stressed loans bypassing courts which was a time-consuming process. Corporate Debt Restructuring (2005) 1.Reduce the burden of debts on the company by giving more time to the company to payback as well as decreasing the rates along with it 5:25 Rule (2014) 1.This is also called Flexible Restructuring of Long Term Project Loans to Infrastructure and Core Industries 2.This involves refinancing of long term projects Joint Lenders Forum (2014) 1.It is done to avoid a situation where a loan is taken from one bank to repay the loans in other banks Mission Indradhanush (2015) 1.It is the most comprehensive reforms undertaken to improve the functioning of the Public Sector Banks, by using the ABCDEFG formula. Strategic Debt Restructuring (SDR) – 2015 1.Corporates who have taken loans from banks if they are unable to repay, then the banks can convert part or complete loans into equity shares Asset Quality Review (2015) 1.This is a kind of preventive measure, involving early identification of assets which could turn out to be stressed at a later stage. Insolvency and Bankruptcy Code (2016) 1.One-stop process for solving insolvencies. 2.Aims to protect small investors.
- 23. CONCLUSION High NPAs may not be favourable for a bank. This is because they are assets that are not performing. High NPAs mean that banks have too many loans that have become non-functional or are not rendering any interest income to the bank. Banks can either keep the NPAs in their books in the hope that they may be able to recover it or make provisions for it. Or else, banks write off the loans entirely as bad debt. However, there are many other factors to assess a bank apart from NPA.