Electrosteel Steels Ltd (ESL), a listed company of the Electrosteel group, said it was facing delays in obtaining project finance disbursals after the inter-ministerial group (IMG) last month recommended “de-allocation” of its shared coal block in Jharkhand.

Cost overruns

Though nothing has yet been made official about cancellation of the “allocation”, the company fears that delays would lead to cost overrun for its and Rs 9,562-crore, 1.3 million tonne steel-making project.

“We have begun to face delays in release of funds and unsavoury questions from the bankers,” Umang Kejriwal, MD, Electrosteel Castings Ltd and Director, Electosteel Steels Ltd, said.

Electrosteel Casting and three other companies are joint holders of the North Dhadu coal block in the North Karanpura coal belt in Latehar district of Jharkhand.

In January 2006, the Coal Ministry had allocated the block for joint mining to four entities for captive use in their sponge iron projects in Jharkhand.

ESL linked the coal asset to its steel-making project, located in Jharkhand’s Bokaro district.

“The 49 per cent share of coal from North Dhadu was to feed three 60MW power plants and a sponge iron unit,” said H.K. Modi, ED, Electrosteel Casting, the group’s flagship.

The North Dhadu asset itself is not hypothecated against any project financing.

Pressure from bankers

But some bankers have started putting pressure, both for funds release and for repayments related to other components of the ESL project.

Some 29 banks and financial institution have lent to ESL.

ESL’s power plants are almost ready for commissioning without the North Dhadu coal and the company had to resort to the blast furnace route to compensate delays in the coal-mining project.

The North Dhadu coal project was stuck for years as the Centre could not clear the mine plan, said Kejriwal.

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