AP to cancel Reliance pact

The Delhi High Court’s dismissal of Reliance Power subsidiary Coastal Andhra Power Limited (CAPL)’s plea for continuation of the stay granted on the notice by APSPDCL to encash its bank guarantee of Rs 300 crore for delay in executing Krishnapatnam Ultra Mega Power Project has come as a shot in the arm for state power utilities.

Said a senior official in AP Transco: “We welcome the court order. The AP Southern Power Distribution Company Limited (APSPDCL)’s share of the Rs 300 crore bank guarantee is about Rs 130 crore. We will initiate measures to encash the guarantee and terminate the agreement for purchase of power from Krishnapatnam power project.”

The APSPDCL had served the notice on the CAPL, which contested it in Delhi High Court and obtained  a stay. Justice S Muralidhar of the Delhi High Court vacated the March 20 interim order. “No case is made out by CAPL for continuation of the interim order passed in its favour on March 20, 2012. The petition is accordingly dismissed and the interim order of March 20 is vacated,” the judge said in the verdict on Monday.

The High Court, while dismissing CAPL’s petition, said the power company has been “unable to show” that encashment of the bank guarantee will cause irretrievable hardship to it. Reliance Power was awarded the contract to execute Krishnapatnam power project in 2007 and the power produced was to be shared by Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra. In its petition, CAPL had said it had to stop work on the project in 2011 due to new Indonesian coal price regulation which had resulted in substantial hike in the cost of imported coal.

The rise in the import cost has rendered the firm incapable of meeting the conditions put in by lenders, CAPL had said in its plea. The court, however, rejected the contention of CAPL saying the company has been unable to “persuade” it that the increase in coal price was the reason for its “non-performance of its obligation” . The court directed CAPL to approach the Central Electricity Regulatory Commission (CERC) regarding its dispute with the AP state-run entity. (With PTI inputs.)