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DB Power may lose coal block

With the government expected to crack the whip on projects that have failed to take off even after years of being given exclusive coal mining rights, DB Power Ltd is among the many companies that face the risk of their captive blocks getting de-allocated.

business Updated: Aug 31, 2012 00:51 IST
HT Correspondent

With the government expected to crack the whip on projects that have failed to take off even after years of being given exclusive coal mining rights, DB Power Ltd is among the many companies that face the risk of their captive blocks getting de-allocated.

In April and May, the government asked a string of companies, including DB Power, to explain the reasons for the delay in projects for which they were granted captive coal blocks many years ago.

The government allocated Durgapur II/Sariya captive coal block to DB Power, which does not have any prior experience in the sector, on November 6, 2007. The block has an estimated 67 million tonne of extractable coal.

The Opposition led by the Bharatiya Janata Party (BJP) has launched a persistent attack against the UPA government after the comptroller and auditor general (CAG) — the state auditor — estimated in a recent report that arbitrary allocation of 57 coal fields to 25 private companies may have robbed the exchequer of potential revenues of R1.86 lakh crore.

DB Power’s Durgapur II/Sariya coal block in Chhattisgarh is among these 57 blocks. “We have made substantial progress for the coal block as well as construction of end use plant in Chhattisgarh. Therefore, (we) have requested the ministry to withdraw the showcause notice. We understand the request is under consideration since then,” a DB Power spokesman told HT.

The terms of the showcause notice, which the government has served on the company, clearly stipulate that the coal ministry may de-allocate the coal block if the company fails to provide a credible reason for delay.

“You are hereby called upon to show cause, on each milestone separately, to this ministry….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 allotment of Durgapur II/Sariya coal block,” said the coal ministry letter to DB Power.

The letter said if DB Power fails to provide a satisfactory response for the delay, the ministry would assume that the company had no explanation to offer and take appropriate action for de-allocation of the Durgapur II/Sariya coal block.

The coal ministry in its review meetings held on January 11 and January 12 , 2012 noticed that no serious efforts were being made by the company to develop the coal block and even after repeated assurances tendered by the company it had missed all important and critical milestones necessary for the development of the coal block.

The showcause notice said, “It is thus seen that the company has repeatedly failed to keep its promises made to the ministry and is thus non-serious about timely development of the block.”