Company expresses concern over CAG report

Reliance Power says that the use of incremental coal from coal mines associated with ultra mega power projects is based on the Empowered Group of Ministers' decision and in line with captive coal policy.

The company has written to the Ministers of Power, Coal, Law, Environment as well as the Planning Commission expressing concerns over the reported observations made by Comptroller & Auditor General of India's audit report on the working of special purpose vehicles in Power Finance Corporation.

According to reports, CAG has pointed at lack of obligations by Reliance Power with reference to its Sasan ultra mega power project (UMPP). The permission for use of incremental coal to other projects by existing UMPP allottees has not created any disparities among the future bidders of ultra mega projects, a company official said.

Stating that no commercial conditions were changed after Sasan UMPP was awarded through transparent international competitive bidding process, the letter, written by Mr A.N. Sethuraman, Group President, said, “All bidders knew the existence of excess coal reserves and that the Government has the right to decide regarding use of surplus coal, if any, from allocated coal blocks through the allocation letters of Coal Ministry provided before bid submission.”

The bidders were informed in December 2006 about the existence of reserves. Moher, Moher Amlori and Chhatrasal have a total coal reserve of 760 million tonne and Sasan UMPPs requirement would be around 400 million tonne.

Any proposal to review EGoM decisions taken more than three years ago could severely dent the confidence of the international lending community in Indian projects and would signal lack of policy stability, thereby jeopardising infrastructure investments in the country, he said in the letter.

The EGoM's decision to permit use of surplus coal did not result in any undue benefit to Reliance Power and has not caused any loss to the Government exchequer.

As the existence of surplus coal and the Government's right to allow its use was known to all the bidders before submission of the financial bid for Sasan UMPPs, the financial benefit of such surplus coal was in-built into the most competitive tariff for project -- Rs 1.19/unit.

Chitrangi Project

On the Chitrangi Project, the company said it had been independently evaluated by CERC in September 2010 and was found to be 11 paise per unit lower than CERC norms.

“Due to different risk profiles and due to different timeframes of execution, tariffs of Sasan and Chitrangi are not comparable. The tariff from Chitrangi can only be compared to other bids received from developers having captive coal blocks among which it is the lowest,” he said.

(This article was published on February 1, 2012)
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