China firm sues Chhattisgarh electricity board

China National Machinery and Equipment Import and Export Company (CMEC) has petitioned the Raipur civil court, demanding that the Chhattisgarh State Electricity Board (CSEB) return the Rs 38 crore security guarantee, which the board had invoked after the company failed to start construction work on the Korba power plant on time.

Last month, the CSEB wrote to the Beijing branch of the Bank of China, where the security guarantee was deposited, asking for the money to be transferred to its banker, the State Bank of India.

"The (Chinese) company has asked that the security guarantee be returned on the ground that it had not received the work order on time," D K Shukla, senior law officer of CSEB, told Business Standard.

The case has been filed before the court of the fourth civil judge first class in Raipur. The Bank of China, the State Bank of India and I B Patel, CSEB officer in charge of projects, are also parties to the petition.

The hearing of the petition has been posted for October 16.

CMEC had outbid Bharat Heavy Electricals Limited (BHEL) to bag the contract for the 600 mw power project in coal-rich Korba district, with the lowest bid of Rs 3.61 crore a MW.

CMEC did not start work even after receiving the letter of intent from the board two months ago.

The company then initiated negotiations for an escalation in the cost, citing rise in prices of steel and other inputs.

This was rejected by the board, which also turned down a request for a two-month extension to begin construction work.

The project, which is expected to ease the power shortage in the region, has been delayed by two years.