Within a month after the Comptroller & Auditor general (CAG) tabled the coal block allocation report in Parliament in August last year, the Central Bureau of Investigation filed a first information report (FIR) against Hyderabad-based Navabharat Power Private Limited for the coal block allotted to it in Odisha in January 2008. And this dragged billionaire Ruia brothers promoted Essar Power into the controversy as it had acquired Navabharat for Rs 230 crore in two tranches in July 2010 and April 2011.
Navabharat Power is a 1,050 MW coal-fuelled power plant being set up in Dhenkanal district in Orissa. The project includes the allocation of 17.39% share of the Rampia coal block that has 112 million metric tonnes of reserves.
The CBI in its FIR has alleged that Nav Bharat misrepresented the facts to get the coal block and later made about Rs 200 crore profit by selling it to Essar Power. The CBI questioned promoters and directors of Navabharat, Y Harish Chandra Prasad and P Trivikarma Prasad. It also quizzed Essar Group director Vikash Saraf in this context.
The CBI alleged that Navabharat would not have had the requisite net worth for the proposed plant for which the block was allotted to it. Essar Group denied allegations of making Nav Bharat its front for getting the coal blocks allotted. Even the CBI in its FIR has not named Essar as an accused.
Following the acquisition, Essar Power has invested more than Rs 500 crore in developing the project and has also achieved financial closure. But no debt has been drawn so far.
Currently the project is awaiting revalidation of various regulatory clearances including environment clearance, water approval, etc. Implementation of the project is linked to mining and regulatory approval revalidation, which is pending for a long time.
Apart from Navabharat, Essar Power has been under the scanner of CAG for the blocks allotted to it for Mahan and Tori projects. Essar Power M.P is setting up 1200 MW power plant at Singrauli in Madhya Pradesh (MP). The first unit of 600MW of Mahan (I) power project in MP was commissioned in Dec 2012. The second unit of 600 MW is at an advanced stage of progress and it will be completed in 2014. The plant is suffering due to lack of mining approval for Mahan Coal Block, which is the captive mine for Mahan Power station.
“The delay in mining approvals has resulted in delay in disbursement of project funding and resultant cost overruns which are putting a severe strain on the company’s balance sheet,” said a company spokesperson giving status of the project.
Essar Power (M.P) is continuing to make good progress towards Stage 2 forest clearance for the block. Essar Power (M.P) has also applied for an allocation of coal under Coal India’s tapering coal linkage system in order to provide Mahan with sufficient coal to cover the period until the coal mine gets forest clearance stage 2 and mine is operational. Currently the plant is being operated utilizing coal from the e-auction market in India.
The Mahan project had achieved financial closure and significant part of the debt for Mahan has already been drawn by Essar Power M.P Ltd. Till date Rs 7,000 crs has been invested in Mahan by Essar Power M.P including debt and equity.
Similarly, Essar Power Jharkhand is setting up 1,800 MW power plant at Latehar in Jharkhand. The project is called Tori project. Over the past few years land acquisition has progressed, equipment ordered and construction and erection commenced with over Rs 3,500 crore invested towards these activities. However progress has been slow and completion has been delayed with 2 coal mines allocated for these projects –Chakla & Ashok Karkatta still awaiting regulatory approvals like environment clearances and forest clearances.
The Tori project had achieved financial closure and some of the debt for Tori has already been drawn by Essar Power Jharkhand. Till date over Rs 3,500 crs invested in Tori including debt and equity. This takes Essar Power’s over Rs 11,000 crore investment await regulatory approvals for mining to get the due returns on investment.
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