Ch'tisgarh invokes bank security on firm

Co fails to meet deadline to start work, says state power board.

State-run Chhattisgarh State Electricity Board (CSEB) has decided to invoke the Rs 36-crore bank guarantee of the China National Machinery and Equipment Import and Export Company (CMEC) for failing to start construction work on the 600-Mw thermal power plants in Korba district, one of the state's key industrial hubs.

This is the first time the state has invoked a security guarantee of a foreign company. Rejecting a request by CMEC for a two-month extension, the CSEB wrote to the Beijing branch of the Bank of China last week asking it to remit the security amount to the board's banker, the State Bank of India.

CMEC, which had built a power plant in Korba for Vedanta-owned Bharat Aluminium Company Ltd (Balco), bagged the project two months ago. It outbid public sector engineering major Bharat Heavy Electricals Ltd (Bhel), quoting the lowest rate of Rs 3.61 crore per Mw for the two 300-Mw plants.

Confirming the development, CSEB Chairman Rajib Ranjan told Business Standard: "Despite receiving the letter of intent, the company did not show any interest in starting the work on the basis of the low rate it had quoted, citing an increase in steel prices and other factors."

National Thermal Power Corporation, which was appointed consultant, selected CMEC and recommended that the company be awarded the contract. The development has paved the way for Bhel to negotiate to implement the project. Ranjan said the board will take a final decision on this soon.

The Korba (West) thermal project has already been delayed by two years.