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Navabharat-Essar Power deal under scrutiny

Source : BUSINESS_STANDARD
Last Updated: Thu, Nov 15, 2012 19:40 hrs

Navabharat Power, whose stake sale to Essar Power has snowballed into a controversy post the surfacing of coal block allocation row, is now facing scrutiny by the Odisha law department.

The law department is vetting the deal to check if the deal was in the ambit of law even as Essar Power has filed a fresh application to take possession of land for the power project earlier proposed by Navabharat. The promoters of Navabharat Power had sold 100 percent share of the company to Essar Power in two tranches soon after being allocated coal blocks. The matter is now being investigated by CBI (Central Bureau of Investigation).  Navabharat Power reportedly made a profit of Rs 200 crore in the deal. The state government has also started vetting of the MoU (memorandum of understanding) signed with Navabharat Power after questions were raised regarding the sanctity of the pact signed with the power producer.

The time period of MoU, signed by Navabharat to set up a 2,250 MW power plant in the state, however, has lapsed since June 2009 and not been renewed.

Navabharat Power had won the Rampia and Rampia dip side coal blocks jointly with five other companies in 2008 for its power plant proposed at Meramundali near Angul. The Opposition had questioned the state government’s basis of recommending coal block in favour of Navabharat Power in 2007. Recently, the state energy department had sought a detailed response from Navabharat Power regarding the status of its MoU and proposed power project.

“No land has been acquired yet for Navabharat Power. Even 6 (1) notification issued earlier under Land Acquisition Act is no longer valid as the MoU signed with the company (Navabharat) has expired. The land procurement process has to begin anew for the project,” a highly placed official source had previously told Business Standard. An Essar Power source informed Business Standard that while they had not taken any decision to shelve the project, the company was going slow on project execution.

The proposed 2,250-MW coal-fired plant at Meramundali requires 1,200 acres and 5,057 million tonnes of coal every year. In the original MoU, Navabharat had committed to start the first unit of the project comprising 525 MW output by January 2014.

Essar Power had earlier said it had invested more than Rs 500 crore on the power project in addition to the acquisition cost of Rs 230 crore.“Essar Power has invested more than Rs 500 crore in developing the project and has also achieved financial closure, with ICICI Bank having underwritten debt financing of more than Rs 3,720 crore,” the Ruias-controlled firm said in a statement on September 5, when the CBI filed FIR against Navabharat.




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