Rel Power gets high court nod to use excess coal in other projects

Rel Power gets high court nod to use excess coal in other projects
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First Published: Mon, Apr 13 2009. 10 41 PM IST

Coal supply: A file photo of the proposed site for the 4,000MW Sasan power project in Madhya Pradesh. Reliance Power was awarded the project in January 2007, at least a year before the eGoM decision.
Coal supply: A file photo of the proposed site for the 4,000MW Sasan power project in Madhya Pradesh. Reliance Power was awarded the project in January 2007, at least a year before the eGoM decision.
Updated: Mon, Apr 13 2009. 10 41 PM IST
New Delhi: The Delhi high court on Monday upheld a government decision to allow Reliance Power Ltd (RPL) to use excess coal from the captive mines meant for the 4,000MW Sasan power project for other such projects being implemented by the company. Tata Power Co. Ltd, whose petition was dismissed by the court, said it plans to appeal to the Supreme Court.
Tata Power, a losing bidder for the Sasan power project, had filed the case after a decision by a so-called empowered group of ministers, or eGoM, to allow the winning bidder, RPL, to use excess coal from captive mines allotted to it for other projects was taken. The company had then claimed, as it did in a statement issued on Monday, that the eGoM’s decision, coming as it did after the conclusion of the bidding process, “disturbed the fairness, transparency, and the level-playing field”.
Coal supply: A file photo of the proposed site for the 4,000MW Sasan power project in Madhya Pradesh. Reliance Power was awarded the project in January 2007, at least a year before the eGoM decision.
The court bench comprising justices M.B. Lokur and S. Mridul dismissed Tata Power’s plea on account of its delay in approaching the court, suppression of facts in petition as alleged by the ministries of power and coal and no locus standi. Tata Power had told the court that the alleged suppression of facts would not give it an advantage in the case and was merely an oversight.
The Sasan project was awarded to RPL on 7 August 2007 after the original winning bidder, a consortium headed by Lanco Infratech Ltd, was disqualified after one of the partners underwent a change in ownership.
The eGoM decision on extra coal was made on 14 August 2008. And Tata Power’s case was filed on 8 January. The government counsel had told the court that Tata Power did not disclose a letter sent by Sasan Power Ltd to all bidders in November 2006 which stated that any “incremental coal” from three coal blocks for the Sasan ultra mega power project could be transferred, sold or delivered with the “sanction of the Union government”.
“We would be filing an appeal before the Supreme Court as we strongly believe that the issue has larger national ramifications,” a Tata Power spokesperson said in Monday’s statement.
An RPL spokesperson in an emailed statement said, “The company has followed the due process of obtaining approval from (the) government of India for use of incremental coal from coal mines allotted to (the) Sasan ultra mega power project and now the decision taken by the government had got judicial ratification.”
The RPL spokesperson further stated: “Tata Power’s record of subverting facts to mask its own failures is now well known. All through this process, they continued to lie to the public and to the judiciary with the sole purpose of thwarting the speedy implementation of the Sasan ultra mega power project”.
The legal challenge by Tata Power becomes significant given the shortage of the coal supplies. A company that knows it can divert surplus coal from captive mines meant for one project to others will be in a position to bid lower as it will have assured supplies of the fuel. To be sure, in this case, RPL merely matched the earlier winning bidders’ bid, and the eGoM decision was made well after this.
Apart from developing the 4,000MW power plant at Sasan in Madhya Pradesh, Reliance Power is developing the 4,000MW plant at Chitrangi, also in Madhya Pradesh. The company has agreed to sell power generated at Sasan at Rs1.19 a unit, while it plans to sell the power generated at Chitrangi at Rs2.45 a unit.
The Central Electricity Authority, or CEA, during a late-August conference with eight companies or consortia that were bidding for a power plant at Tilaiya in Jharkhand, stated that the change in rules regarding coal use applied only to the Sasan project as reported by Mint on 9 September.
Shubhranshu Patnaik, executive director at audit and consultancy firm PricewaterhouseCoopers, said: “Wherever there is a captive coal mine project, there should be a transparent policy on dealing with surplus coal which applies to all UMPPs (ultra mega power plants), not just Sasan or Tilaiya.”
The large power plants at 12 locations in Madhya Pradesh, Andhra Pradesh, Gujarat, Jharkhand and other states are part of the government’s efforts to increase the country’s power generating capacity. Out of these, four have thus far been awarded.
Senior government officials did not respond to repeated phone calls.
Tata Power stock on Monday rose Rs22.10, or 2.5%, to Rs906.30 at the close of trading on the Bombay Stock Exchange. Shares of RPL rose Rs3.25, or 2.7%, to Rs123.40. The exchange’s benchmark index Sensex rose 1.51% to 10,967.22.
utpal.b@livemint.com
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First Published: Mon, Apr 13 2009. 10 41 PM IST