Govt issues notice to cancel Essar Power coal mine

The coal ministry has issued a notice for termination to Essar Power over its inability to pay the upfront amount for the Tokisud North coal block in Jharkhand.

Essar Power delayed the second installment and has not paid the third installment despite several deadline extensions.

The company had replied to prior government notices citing its inability to arrange finance and GVK Power, the prior allottee, not providing details about the mine.

A Supreme Court decision in August 2014 cancelled all coal block allocations made over two decades.

The government noted Essar Power should have taken into consideration its financial condition before bidding for the mine.

“As the final opportunity given by the state government for execution of the mining lease is over, the nominated authority is constrained to terminate the agreement,” the notice said. The nominated authority is a department of the coal ministry conducting the mine auctions.

Essar Power signed the mining lease with the Jharkhand government for the Tokisud mine in July 2015. The state government issued three reminders to Essar Power to meet its mining obligations.

Coal ministry officials said the notice was marked to banks as well to freeze the bank guarantee to the company.

In an e-mailed response to Business Standard, Essar Power said it had recently responded to the coal ministry, stating it would pay Rs 17 crore as the final instalment and would execute the mining lease for the Tokisud mine. It was awaiting a response, the company added.