Coal Ministry may fine GMR, Essar ₹900 cr for ‘non-performance’

Twesh Mishra New Delhi | Updated on April 19, 2019

File photo   -  Bloomberg

The Coal Ministry will rake in approximately ₹900 crore from Essar and GMR for non-performance after bagging coal blocks in the first auction round held in 2015.

This follows the Delhi High Court’s dismissal of petitions filed by Essar and GMR seeking a refund of the bank guarantees deposited by them, as they were not being allowed to pass through higher bid amounts to the consumers.

GMR Chhattisgarh Energy Ltd (GCEL) had won the Ganeshpur and Talabira coal mines while Essar Power Madhya Pradesh had won the Tokisud North coal block.

The companies had argued that they were unable to monetise the blocks due to changes in the bid terms after the award of contracts. They wanted to surrender the blocks to the Coal Ministry and seek a return of the bank guarantees. However, the court dismissed their petition. “As far as Ganeshpur is concerned, it (GMR) did not remit the second or third instalments of the upfront payment, or apply for the mining lease or forest clearance, within the stipulated time frame...we are of the view that it would not be appropriate for the writ court to afford relief to the petitioners in such circumstances.”

Both GMR and Essar did not respond to queries from BusinessLine. But sources close to the development said Essar is going to appeal against the High Court order.

Bank guarantees

According to a Coal Ministry letter, bank guarantees of ₹294.9 crore and ₹261 crore respectively were to be parked by GCEL and Essar as performance security for the Ganeshpur mine and Tokisud North coal block. GMR Infra’s audit report for FY18 said: “During the period ended September 30, 2017, GCEL has filed a writ petition with the Delhi High Court for surrendering both the coal blocks allotted during the year ended March 31, 2015.”

Published on April 19, 2019

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