The Ministry of Coal has issued a show-cause notice to Reliance Power asking why it should not invoke the bank guarantee due to delay in development of the Kerandari B & C coal blocks given to the company’s erstwhile Tilaiya ultra mega power project.
Reliance Power’s bank guarantee for the Kerandari B & C coal blocks is worth ₹800 crore.
The notice put on the Coal Ministry’s website stated that Reliance Power and its subsidiary Jharkhand Integrated Power Ltd (JIPL) “cannot be absolved of their responsibility of paying for damages for non-achievement of milestones set for the development of the Kerandari B & C coal blocks”. After terminating the power purchase agreement (PPA) for the Tilaiya UMPP, Reliance Power had written to the Coal Ministry for release of the bank guarantee given for the Kerandari B & C coal blocks.
The Ministry has considered of the termination of the PPA of the Tilaiya UMPP as extraneous to the development of the coal blocks, the notice added.
It has sought a reply from the company within 15 days on why the bank guarantee should not be deducted.
According to the milestones for development of the Kerandari B & C coal blocks, the mining lease application was to be made within three months, mining plan was to be submitted within six months, applications for environment and forest clearances was to be made within 12 months, land acquisition was to start by 19 months and production within 36 months.
Reacting to development, Reliance Power said that it has not received the show-cause notice so far.
“Reliance Power terminated the PPA for Tilaiya UMPP entered into with 18 procurers, vide notice dated April 28, 2015, nearly 14 months ago. The termination was due to prolonged delay in fulfillment of the procurers’ development period obligations in respect of land for power plant and coal mine for more than five-and-half years. The Procurers led by the Lead Procurer, Jharkhand Urja Vikas Nigam Ltd (JUVNL) have already accepted the termination of the PPA due to procurers’ event of default in November 2015 or nearly eight months ago,” the company said in a statement.
The company’s statement added that Power Finance Corporation, the nodal agency for UMPPs, has also recommended PPA termination due to procurers’ event of default and communicated the same to Ministry of Power and Ministry of Coal. It also said that the procurers are at final stage to acquire JIPL from Reliance Power.
“Earlier in December 2013, the Ministry of Coal had sent a similar show-cause notice and it was responded in detail by the company in January 2014. There has been no response from the Ministry of Coal for the last two-and-a-half years,” said Reliance Power’s statement, adding that a detailed response to the new show-cause notice will be submitted in due course.