Parent group has denied allegations that Navbharat Power is a front for getting coal blocks allotted.
Within a month of the Comptroller and Auditor General of India (CAG) tabling the coal block allocation report in Parliament in August last year, the Central Bureau of Investigation (CBI) filed a First Information Report (FIR) against Hyderabad-based Navabharat Power Private Ltd for the coal block allotted to it in Odisha in January 2008.
This dragged the Ruia brothers-promoted Essar Power into the controversy, as it had acquired Navabharat for Rs 230 crore, in two tranches in July 2010 and April 2011.
Navabharat Power is a 1,050 Mw coal-fuelled power plant being set up in Dhenkanal district in Odisha. The project includes the allocation of 17.39 per cent share of the Rampia coal block, which has 112 million tonnes of reserves.
The CBI in its FIR has alleged Navabharat misrepresented facts to get the coal block and later made a profit of Rs 200 crore by selling it to Essar Power.
The CBI questioned the promoters and directors of Navabharat, Y Harish Chandra Prasad and P Trivikarma Prasad. It also quizzed Essar Group director Vikash Saraf.
The investigating agency alleged Navabharat would not have had the requisite net worth for the proposed plant, for which the block was allotted to it. The Essar Group denied allegations of making Navbharat its front for getting the coal blocks allotted. Even CBI in its FIR has not named Essar as an accused.
Following the acquisition, Essar Power has invested more than Rs 500 crore in developing the project and also achieved financial closure. However, no debt has been drawn so far.
Currently, the project is awaiting revalidation of regulatory clearances including environment clearance, water approval, etc. Implementation of the project is linked to mining and regulatory approval revalidation, pending for a long time.
Apart from Navabharat, Essar Power has been under the scanner of CAG for the blocks allotted to it for Mahan and Tori projects. Essar Power MP is setting up a 1,200-Mw power plant at Singrauli in Madhya Pradesh (MP).
The first unit of 600 Mw of Mahan (I) power project in MP was commissioned in December 2012. The second unit of 600 Mw is at an advanced stage of progress and will be completed in 2014.
The plant is suffering due to lack of mining approval for the Mahan Coal Block, captive mine for the Mahan Power station.
“The delay in mining approvals has resulted in delay in disbursement of project funding and resultant cost overruns, which are putting a severe strain on the company’s balance sheet,” said a company spokesperson.
Essar Power (MP) continues to make good progress towards Stage-II forest clearance for the block. The company has also applied for allocation of coal under Coal India’s tapering linkage system in order to provide Mahan with sufficient coal to cover the period until the coal mine gets forest clearance for Stage-II and mine is operational. Currently, the plant is being operated using coal from the e-auction market in India.
The Mahan project had achieved financial closure and significant part of the debt for Mahan has already been drawn by Essar Power MP. Till date, Rs 7,000 crore has been invested in Mahan by Essar Power MP, including debt and equity.
Similarly, Essar Power Jharkhand is setting up a 1,800-Mw power plant at Latehar in Jharkhand. The project is called Tori project. Over the past few years, land acquisition has progressed, equipment ordered and construction and erection commenced with over Rs 3,500 crore invested towards these activities. However, progress has been slow and completion has been delayed with two coal mines allocated for these projects, Chakla and Ashok Karkatta, still awaiting regulatory approvals such as environment clearances and forest clearances.
The Tori project had achieved financial closure and some of the debt for Tori has already been drawn by Essar Power Jharkhand.
Till date, over Rs 3,500 crore has been invested in Tori including debt and equity. In all, Essar Power’s Rs 11,000 crore worth of investments await regulatory approvals for mining to get the due returns on investment.
Part 1: Coal fire: 3 Tata Group firms under CAG spotlight