Reliance Power faces crackdown; here’s why

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Updated: June 23, 2016 7:23:01 AM

The coal ministry on Wednesday issued issued a show-cause notice to Reliance Power, asking why the government should not deduct its bank guarantee for failure to develop the captive coal mines associated with Tilaiya ultra mega power project (UMPP) in Jharkhand.

power tariff hikeIn its response, Reliance Power said it had terminated PPAs 14 months ago and the SPV for Tilaiya UMPP was in the process of being acquired. (Reuters)

The coal ministry on Wednesday issued issued a show-cause notice to Reliance Power, asking why the government should not deduct its bank guarantee for failure to develop the captive coal mines associated with Tilaiya ultra mega power project (UMPP) in Jharkhand.

Last year in May, the firm had terminated the power purchase agreement with the procurers of the proposed Tilaiya UMPP citing procurers’ failure to fulfil obligations, including land acquisition even after five-and-a-half years. Among the UMPP’s bid-out in 2007, Reliance Power had won the rights to develop 4,000 MW capacity power plant in Tilaiya.

“You are hereby called upon to show cause, on each milestone separately…as to why the delay in the development of the coal block should not be held as violation of the terms and conditions of the allocation of Kerandari B&C coal block and why the bank guarantee submitted by you should not be deducted for non-achievement of milestones stipulated for development of coal block,” the ministry said.

The government’s notice was in response to Anil Ambani-promoted firm’s request to the ministry that asked for release of bank guarantee submitted by the company for Kerandari B&C coal blocks. The coal ministry contended that the development of the coal block should have happened as per the prescribed milestones even if the procurers didn’t fulfil their power purchase agreement.

The ministry has given the company 15 days to reply and said in case no response is received within this period, it would be presumed the company had no explanation to offer and action, as appropriate, would be taken against it.

In its response, Reliance Power said it had terminated PPAs 14 months ago and the SPV for Tilaiya UMPP was in the process of being acquired.

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