Essar loses coal mine for non-payment, may be barred from CIL supply too

NEW DELHI: The coal ministry has terminated Essar Power’s contract for development of the Tokisud coalmine in Jharkhand for non-payment of dues.


"As per coal block auction norms, Essar Power will be barred from bidding in coal block auctions for a year. The ministry is also considering stern action against the company, " "The termination notice will come into effect from October 6. The firm's Rs 261-crore bank guarantee will also be forfeited," a senior official to ET.

The government is also considering disqualifying the company from receiving fuel supplies from Coal India, the official said, adding that a decision on Tokisud mine will be taken in due course.

Essar Power had earlier told ET that it is facing legal and technical issues after the allocation of the Tokisud block, which is the most expensive coal mine among those auctioned to the power sector. The company had won the producing coal block in an aggressive bidding round with a bid of Rs 1,110 per tonne.

Essar Power, like all other power companies that won coal mines, had agreed to forego mining costs and instead pay the state government premium in addition to a fixed price of Rs 100 per tonne.

Scrapping of the coal block will have an adverse impact on Essar Power's 1,200 mw Mahan power plant in Madhya Pradesh which has been shut for several years now. Operations at Mahan’s unit I had begun in April 2013 but had to be suspended because of non-availability of coal. Mining licence for an attached Mahan coal block was cancelled by the Supreme Court in October 2014.