Chhattisgarh pushes for untested MMTC

Chhattisgarh pushes for untested MMTC

New Delhi: The Bharatiya Janata Party-ruled Chhattisgarh government is looking to speed up the award of a 1,350MW power project and a coal mine to state-owned mineral trading firm MMTC Ltd which doesn’t have much experience in either mining or power generation, and which says it will partner with a private sector firm for the project.

The move comes amid charges, including those from officials associated with the initiative, that the state government has not followed due procedure and that the award to MMTC will allow a private firm access to the coal, a commodity that is increasingly becoming scarce.

Chhattisgarh goes to the polls this year and once elections are notified, governments are barred from conducting extraordinary business such as announcing or awarding projects.

The Chhattisgarh State Electricity Board, or CSEB, is scheduled to meet on Monday to clear the deal and this will be followed by a meeting of the Chhattisgarh Mineral Development Corp., or CMDC, said a government official who is part of the process but did not want to be named.

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“Such an important deal is being finalized without going for a sealed financial tender and just based on a simple presentation by certain invited companies. A transparent system was not followed," this person added.

Around 40 public sector firms including Bharat Heavy Electricals Ltd, or Bhel, and MMTC responded to a so-called expression of interest tender from the state government for setting up the 1,350MW power project and developing the coal mine.

Shivraj Singh, the chief secretary of Chhattisgarh who retired in July but continued as an adviser till 26 September before becoming the state’s election commissioner, declined comment because he is no longer part of the government. However, the government official quoted above said Singh had attended at least four meetings with companies to finalize the deal.

Repeated calls and messages to the cellphones of Rajiv Ranjan, chairman of CSEB, and Vivek Dhand, principal secretary to chief minister Raman Singh, went unanswered. So did calls to and messages left with the office of P.K. Mishra, managing director, CMDC.

According to the project proposal, the selected firm will form two separate joint ventures with CSEB and CMDC, respectively. In the first instance, CSEB will hold a 26% stake in the joint venture, while in the second, CMDC will hold 51% in the firm in keeping with government laws that mandate that coal mining can be done by any venture in which the government has at least a 51% stake.

The representative of a private sector power firm that has interests in Chhattisgarh but isn’t associated with this project claimed the state government’s proposal is silent on the issue of the selected public sector firm partnering with a private sector firm. This couldn’t be verified independently by Mint.

“This particular deal raises some pertinent questions: On what basis is the coal mining work being given to MMTC? What is the benefit to the state? ...if there is private sector involvement, why are other private sector firms not being given an open platform to compete?" asked this person, who did not want to be named because his firm does business with the state government.

“We are aware that the project will be awarded to MMTC. However, the state government should have made the process more transparent," said a senior executive at Bhel, who did not want to be named.

An executive at MMTC confirmed his firm’s interest in the project and its plan to find a private sector partner, but denied it had been awarded the project. “On date we are not even sure whether we are selected as a partner by the state government. However, if selected, the MMTC participation cannot be stand-alone because of the huge investment requirement. It has to be done through the public-private partnership route," said H.S. Mann, director, marketing, at MMTC. He added that if selected, MMTC plans to form a joint venture with a private sector firm for developing the coal mine and the power project at a combined cost of around Rs7,000 crore.

Mann said MMTC had sought an expression of interest and that seven firms, including the Indiabulls Group, Adani Group, Tata Power Ltd and Larsen and Toubro Ltd have been shortlisted.

Gagan Banga, group spokesperson, Indiabulls, denied his group’s interest and involvement. “There is no such association with MMTC for coal mining."

MMTC and Indiabulls also have plans to set up a multi-commodity exchange. Incidentally, Indiabulls Power Services Ltd, a unit of Indiabullls Real Estate, recently won a bid for a 1,600MW project in Chhattisgarh and an associated coal mine by quoting a tariff of Re0.81 per unit.

Power projects in India are usually awarded through the bid process to the company quoting the lowest cost of generation per unit.

While a Tata Power spokesperson declined comment, executives at Adani Group and Larsen and Toubro could not be reached over the weekend.

Anish De, chief executive officer of energy consulting firm Mercados Asia, said “past instances of selection of partners by state mineral development corporations have inherently been opaque and have landed in courts".

The government official claimed coal reserves at the mine were more than adequate to generate 3,500MW of power and said the excess coal could be traded commercially.

“No one knows the amount of coal that the block has as it is not an explored block. If there is excess coal, what to do with that coal is to be decided by the board of the coal mining joint venture," said Mann.

India has 256 billion tonnes of coal reserves, of which around 455 million tonnes (mt) per annum is mined. The country currently imports around 40mt of coal.

Although India has an installed power generation capacity of 145,000MW, the actual generation is only around 100,000MW. Around 67% of this installed capacity is based on coal.