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New UserReliance permitted to mortgage Sasan coal block
24 Aug 2016
The government on Tuesday approved Anil Ambaniled Reliance Power's
request to mortgage coal blocks attached to Sasan ultra mega power project (UMPP) in
Madhya Pradesh to foreign lenders of the plant that include banks from the US, China and
Singapore, official sources said.
Earlier, the coal ministry had rejected the proposal in a letter dated May 10 to the company
and Madhya Pradesh government. The decision, the letter had said, was based on views of
the power ministry that there was no provision for mortgage of coal blocks in contract
documents and the power purchase agreement for the project.
Upon the power ministry's objection that it never communicated such a view and the coal
ministry should decide whether the coal blocks can be counted as assets for mortgage, the
matter was referred to an interministerial committee, sources said.
The committee last month concluded that the mortgage will not 'vitiate' any rules. It said coal
blocks cannot be counted as assets for mortgage, but the mining lease can be mortgaged. The
committee under the chairmanship of ministry of power had refrained from making any clear
recommendation.On Tuesday, Power, Coal, Renewable Energy and Mines Minister Piyush
Goyal approved mortgage.
Reliance Power had in 2012 approached the coal ministry seeking permission to assign the
mining lease of Moher and Moher Amlohri Extension coal blocks as security to lenders. The mining leases for the blocks were executed
between the state and Reliance Power in September 2011.
The company told the central government that mortgage was a prerequisite for theRs 14,500crore debt that the company borrowed from a
consortium of 14 banks led by State Bank of India in April 2009.
The banks that financed 75 per cent of the Rs 19,400crore Sasan project included US Exim, Bank of China, China Development Bank
and The Export Import Bank of China.
The company has claimed that Rule 37 of Mineral Concession Rules, 1960 provides for securing scheduled banks by mortgaging mines.
SOurce:Economic Times