SC agrees to hear Essar Power MP plea on surrendering Jharkhand coal mine

Top court refuses to interfere with govt decision to invoke the Rs 200 cr bank guarantee during currency of hearing

The Supreme Court on Wednesday agreed to hear Essar Power MP’s plea against the government decision to invoke its bank guarantee worth Rs 200 crore, but said would not call upon the Centre to return the guarantee while the hearing was on. 

The top court will also hear the company’s plea to return the Tokisud North coal mine in Jharkhand.

Last month, the Ministry of Coal had issued notices to Essar Power and GMR Energy to confiscate their bank guarantees worth up to Rs 900 crore following a judgment by the Delhi High Court rejecting the companies’ petition to surrender their coal blocks. The two companies had submitted these bank guarantees for the coal mines they won in an auction in 2015-16.

The ministry had then decided that if the two companies moved Supreme Court in the designated time, they would withdraw the notice or else implement it.  Essar Power MP had on Wednesday moved the court alleging that the said bank guarantee had been invoked by the government and the same should be returned to them during the pendency of the case.

A two-judge bench of the top court led by Chief Justice of India Justice Ranjan Gogoi said that though they would not interfere with the decision of the government to invoke the bank guarantee, they would hear Essar Power MP’s plea to surrender the coal mine.

The Rs 900-crore bank guarantees are for the two blocks of GMR and one of Essar. While Essar won in Jharkhand, GMR had placed winning bids for Talabira-I coal mine in Odisha and Ganeshpur mine in Jharkhand.

In 2015, the power companies had moved the Delhi High Court protesting against a change in regulations made by the central government, which was changed after the auction proceedings were concluded. The Central Electricity Regulatory Commission (CERC) had in May 2015 disallowed any pass through of fixed cost on final power tariff by the power producers who won coal blocks. This was done following a directive of the power ministry.

The CERC’s directive was done to ensure low power rates from the units associated with the blocks after the power companies had won the said coal blocks by quoting extremely low rates during the reverse bidding. The directive restricted higher energy charge by coal block winners and allowed only “downward revision” of tariff. This had hit the power companies, who could have benefited by escalating the other component of the tariff, to compensate the low rates quoted for the block.