Essar Power pays Jharkhand coal mine dues

Mining execution still in limbo

Two weeks after the ministry of coal issued a notice of default of payment to Essar Power, the company paid the pending amount.

The payment, done on Thursday, pertains to the third and last tranche of payment of the upfront amount for the Tokisud North coal block in Jharkhand, which Essar won in an auction last year. As the state government has not extended the mining lease for the company, starting operations at the mine would take time.

Senior officials in the ministry told Business Standard that Essar Power paid the pending Rs 17 crore on Thursday. The company confirmed the development.

A company spokesperson said: “Essar would like to state that the company has recently approached and responded to the MoC, stating that Essar will be paying Rs 17 crore towards the final installment and will execute the mining lease for the Tokisud mine and is awaiting a suitable response.”

Ministry officials said the Jharkhand government had denied the extension of mining lease for Essar Power after the company delayed payment. “The state government would now review the mining lease and re-issue it. The decision lies with the state government,” said the official.

Jharkhand officials could not be contacted immediately. Sources, however, said it would take more than two weeks for the mining lease to be re-issued.

In the notice issued by the ministry on September 15, the government observed that Essar Power has been defaulting on payment for operating the mine. The company had replied to prior notices of the government, over the past year, citing several reasons, including its inability to get finance and details regarding the mine from the prior allottee.

“In view of the above circumstances, it is clear that the successful bidder is unwilling to deposit the third installment and is unwilling to get the mining lease executed. As the final opportunity given the state government for execution of the mining lease is already over, the nominated authority is constrained to terminate the agreement,” said the September 15 notice reviewed by Business Standard.

The nominated authority is the designated department of the coal ministry that executes the coal auction proceedings.

A mining lease was signed with the state government of Jharkhand in July 2015. The state government issued three letters to remind Essar Power to meet its mining obligations and raised issues of delay.

To this, the company said it had invested Rs 450 crore by way of cash payment and performance guarantee and have made all efforts to start mining at the Tokisud North coal block. “We have not been able to commence any development work, as Essar has not received important data and documents pertaining to rehabilitation and resettlement (R&R). In view of this, the mining lease could not be executed despite our best efforts and we could not make the final payment of Rs 17 crore,” said the Essar spokesperson.

Tokisud was earlier owned by GVK Power. A Supreme Court decision in August 2014 had cancelled all coal block allocations made over two decades.

Essar also said there was a law & order issue at site. “There are many local contractors/sub-contractors to whom prior allottee owes considerable amounts. Until logical settlement is completed, commencement of any work will be extremely difficult,” the company added.