After losing coal blocks, Tata Power, Adani Power and others now face deduction of bank guarantees

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January 17, 2015 10:57 AM

After losing their coal blocks, leading power and steel companies may lose their bank guarantees furnished against their mines...

Coal, coal blockThe coal ministry has show-caused 130 leading power and steel companies to justify why the bank guarantees should not be deducted. (Reuters)

After losing their coal blocks, leading power and steel companies may lose their bank guarantees (BGs) furnished against their mines, as the coal ministry has show-caused them on Friday to justify why the BGs should not be deducted.

In show-cause notices issued to 130 companies including JSPL, JSW and Tata Steel, the ministry has asked them to explain reasons behind the delays in developing their mines within three weeks failing which their BGs may be deducted.

These companies had petitioned the Delhi High Court saying that the reasons for not being able to develop the allocated mines were beyond their control and mostly on account of delays of the government and its agencies.

Moreover, the BGs were in the nature of performance guarantees and following cancellation of the mines by the Supreme Court in September the invocation of the BGs would not be justified. Hence, they should be released in favour of the respective companies, the companies had argued in their petition.

But justifying serving of the show-cause notices, the coal ministry cited a Delhi HC order on October 30, in which the it said “the petitioners would keep alive all BGs in favour of the respondents for further three months.” The three-month period expires on January 30.

The companies which have been served notices include Monnet Ispat and Energy Ltd, Bhushan Ltd, Nalco, Hindalco Industries, NTPC, Essar Power, SAIL, Adani Power and Tata Power.

Following the HC order, an inter-ministerial group (IMG) of the coal ministry was asked to recommend a course of action for the BGs on a case-to-case basis. The IMG in its meeting on December 30, 2014 observed.

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