Essar Power, GMR receive govt notice to revoke bank guarantees

The Ministry of Coal has issued notices to Essar Power and GMR Energy to confiscate their bank guarantees worth up to Rs 900 crore following a judgment by the Delhi High Court rejecting the companies’ petition to surrender their coal blocks. The two companies had submitted these bank guarantees for the coal mines they won in an auction in 2015-16.

“We have issued the notice to invoke their bank guarantee. If they move Supreme Court in the designated time, we will withdraw the notice, else we will implement it. In any case, the companies have missed all deadlines of production. The two companies have not made a single breakthrough in the mining of these blocks,” a senior coal ministry official said.

The Rs 900-crore bank guarantees are for the two blocks of GMR and one of Essar. While Essar won Tokisud North coal mine in Jharkhand, GMR had placed winning bids for Talabira-I coal mine in Odisha and Ganeshpur mine in Jharkhand.

“The revision of tariff undertaken by CERC shall not lead to higher energy charges and total tariff throughout the tenure of power purchase agreements (PPAs),” the Ministry of Power had said in a directive to CERC.

The CERC’s directive was done to ensure low power rates from the units associated with the blocks after the power companies had won the said coal blocks by quoting extremely low rates during the reverse bidding. The directive restricted higher energy charge by coal block winners and allowed only “downward revision” of tariff. This had hit the power companies, who could have benefited by escalating the other component of the tariff, to compensate the low rates quoted for the block.

Following the directive, the companies had moved court seeking to surrender the coal blocks and pressed for the release of the bank guarantees submitted by them. While Monnet Power had approached the high court in 2015, others, such as GMR Energy and Essar Power, had approached the court in 2017. In 2015, the Delhi High Court had, while refusing to rule on whether the CERC could “at all put a cap on the fixed charges”, allowed Monnet Power to surrender its mine without paying any penalty.

In 2016, the coal ministry issued a notice of termination to Essar Power for its inability to pay the upfront amount for the Tokisud North Coal block. Essar Power delayed the second installment and did not pay the third installment after several instances of extending the deadlines. The company, however, paid the amount after some delay.

In 2017, Essar Power and GMR approached the high court, citing the earlier 2015 judgment allowing Monnet Power to withdraw. The court, however, rejected their claim on the grounds that they had not approached the court within the stipulated time.

“We find that the petitioners did not raise any dispute with the Union of India (UoI) regarding the effect of the said notification until the judgment in Monnet Power had been delivered,” a two-judge Bench of Justice Prateek Jalan and Justice Ravindra Bhat said in their April 15 judgment.
The judgment by the high court shall, however, not be limited in seeking relief from through any other proceedings or before any other court, the two-judge Bench had said.

The power companies, which won coal blocks were GMR Energy, Monnet Power, Jindal Steel & Power, Essar Power, CESC, Durgapur Power, Adani Power, Jaiprakash Ventures and Hindalco. Of this, only Monnet Power surrendered its mine without paying any penalty.