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Govt not to review decision allowing R-Power to divert surplus coal

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The government today decided to stick to its earlier decision of allowing (R-Power), an Anil Dhirubhai Ambani (ADA) Group company, to from the mines allotted for its Ultra Mega Power project (UMPP) to Chitrangi power plant, another nearby project being developed by the company.

The decision comes at a time when the Comptroller and Auditor General (CAG), in a recent draft report, alleged the government’s decision to allow the diversion led to a Rs 15,849-crore financial benefit for the company. The draft report was quoted in a Times of India news report on March 22 as finding undue benefits through allotments of 155 coal blocks to various companies. Later, in a letter to Prime Minister Manmohan Singh, had downplayed the draft report, saying “the details being brought out were observations under discussion at a very preliminary stage and do not even constitute our pre-final draft and, hence, are exceedingly misleading”.

After the meeting of an Empowered Group of Ministers (EGoM) today, Law Minister told reporters the government could not review decisions taken in the past. “The Attorney General had interpreted the EGoM’s decision taken in 2008 in the matter and had said the decision was correct. Obviously, we will go by the opinion, as it explains and fortifies the 2008 decision,” he said. “No more meetings on the matter are required,” he added. The ministerial panel is headed by Finance Minister Pranab Mukherjee.

Khurshid also argued that the government’s policy should not discourage a developer from producing surplus coal if the use of a better technology allows incremental production. Interestingly, R-Power had been making the “use of more efficient technology” argument to refute CAG’s methodology of arriving at the undue benefit figure.

Asked whether today’s decision would set a precedent and used by the government to allow surplus coal diversion in all similar cases going forward, Khurshid said a comprehensive policy on surplus coal would be finalised soon, based on the Attorney General’s recommendation, to avoid ambiguity in the future. The AG had said the government had the right to permit allocatees to use surplus coal for other projects and that the EGoM’s approval to diversion was a well considered decision.

An R-Power spokesperson declined to comment on the matter. The company had bagged the 3,960-Mw Sasan through tariff-based competitive bidding in 2007. The company was allotted three captive blocks — Moher, Moher-Almohri Extn and Chhatrasal — for developing the project. Taken together, the three blocks have an annual production potential of over 25 mt.

The EGoM had in August 2008 permitted the company to divert surplus coal, subject to certain conditions. These conditions included priority to Sasan UMPP in use of coal from the allotted blocks and sale of power generated from surplus coal only through bidding.

Tata Power, which was one of the bidders for the project, approached the Delhi High Court challenging this diversion and sought a retendering for the UMPP, arguing the permission was a substantial deviation from the bid conditions and affected the economics of the project. Tata Power's plea was dismissed in April 2009. R-Power, in turn, argues the government's right to grant permission for use of incremental coal was in-built in the allocation letter of Sasan UMPP and, hence, there was no change of commercial conditions after award of the project.

Clause 12 of the allocation letter for Sasan says no coal should be sold, delivered, transferred or disposed of except for the stated captive mining purposes, except with the previous approval of the central government on a case-to-case basis. The allocation letter also says, under clause 6, that surplus coal, if any, could be handed over to the nearest Coal India subsidiary at a transfer price to be determined by the government.

R-Power is planning to commission the first 660-Mw unit of Sasan UMPP in January 2013, according to the power ministry. The company has acquired 96 per cent of the 3,723 acres of land requirement. While the environment clearance for Moher and Moher Amlori Extn has been granted, clearance for Chhatrasal block is awaited.

Today's EGoM meeting was attended by Power Minister Sushilkumar Shinde, Coal Minister Sriprakash Jaiswal and Planning Commission Deputy Chairman Montek Singh Ahluwalia, besides Mukherjee and Khurshid. The Sasan coal diversion dispute is currently in the Supreme Court and is likely to he next heard in July this year.

Reacting to today's EGoM decision, Tata Power said in a media statement: "The Sasan matter is sub judice. The case is admitted in the Honourble Supreme Court and will be heard soon. Tata Power believes the award of the contract and the post-award changes in the terms/basis of the tenders invited had resulted in an arbitrary and discriminatory denial of level playing field to the other bidders."

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