Coal min may invoke Rs 233-cr guarantee on delayed NTPC block

Written by Subhash Narayan | New Delhi | Updated: Aug 28 2014, 07:04am hrs
Indias largest power producer, NTPC, may have to surrender a bank guarantee (BG) of Rs 233 crore for failing to develop its captive coal block at Talaipalli in Chhattisgarh, allocated to it in January 2006 under the government dispensation route. Sources said the coal ministry has refused to consider NTPC's request for a waiver, clearing the way for the amount to be withdrawn by the ministry as penalty for the delay.

The development comes at a time when the Supreme Court has termed as illegal all captive coal block allotments between 1993 and 2010 under the Screening Committee route. NTPC, its officials say, remains unaffected as its blocks were given under the government dispensation route, and also because the company, being a central utility, is eligible to extract coal under the Coal Mines (Nationalisation) Act.

As per the stretched time limit between getting a clearance and acquiring land, NTPC should have had the mine operational in 5-6 years. But land acquisition-related delays have delayed the milestones agreed upon by the company, and NTPC now expects to start operations by March 2015.

We are going by the book and invoking the bank guarantee, which has been done in several other cases as well, based on wide deviation of the agreed milestone by the power generator, said an official in the coal ministry.

NTPC had requested the ministry to reconsider the imposition of the bank guarantee as it faced delays due to pending land transfer by the state government. Rejecting the request, the ministry has asked NTPC to submit BG with the Coal Controller's Organisation immediately.

NTPC was allotted six coal blocks (with 3-billion-tonne reserves) earlier, and all these mines have been facing delays due to lack of statutory clearances and other land-related issues. The government allocated another four blocks with 2-billion-tonne reserves to the company recently.

The company has assessed that all six blocks together hold about 53 million tonne of coal, which will cater to around 10,840 MW of its geneation capacity. All the coal blocks allocated to NTPC earlier are facing delays in getting operational.

NTPC currently needs 160 million tonne coal to run its coal-based capacity of about 35,000 MW. About 16 million tonne of this is imported at prices that are almost two-and-a-half times the average coal price of Rs 1,400 tonne offered by Coal India. As the company's coal-based capacity is expected to rise to 52,000 MW by 2017, production from captive blocks is important to maintain the competitive edge.