The public sector behemoth Steel Authority of India Ltd. is planning to commence work on the Tasra coking coal project with Lanco Infratech Ltd. against whom a corporate insolvency resolution process has been initiated.
Work is scheduled to begin formally soon and a ceremonial unveiling is scheduled for September 17 — the day of Vishwakarma Puja when all factories here observe a ‘tool-down’ day to commemorate Vishwakarma, the celestial engineer in Hindu mythology.
Tasra is about 25 km from Dhanbad in Jharkhand, and SAIL is pinning its hopes on this project in the Jharia coalfields to part-secure its coking coal requirement.
The project will be developed by Lanco Infratech, a mine development operator (MDO) with whom SAIL had signed an agreement in September 2013 for developing the project at a cost of ₹400 crore within two years. Subsequent changes in land acquisition laws thwarted the project’s progress even as it led to a 10-fold increase in cost to the current ₹4,000 crore. The project now includes a 300 MW power plant.
However, despite the cost escalation, the public sector unit is convinced of its viability. The investment would be made by the MDO and reimbursed by SAIL.
Insolvency proceedings
Complexities arose after the National Company Law Tribunal initiated Corporate Insolvency Resolution Process (CIRP) against LITL based on an application filed by IDBI Bank Ltd., the financial creditor of the company. Savan Godiawala has been appointed as Interim Resolution Professional effective August 7, 2017 under the provisions of IBC and the powers of the Board of Directors stand suspended, Lanco said in a regulatory filing. When contacted, A. Narasimhan, executive director, Corporate Communication, Lanco Group regretted his inability to respond to any queries in this respect.
Interestingly, IDBI Bank, LITL’s lead bank has sent to SAIL a comfort letter, urging it not to stop the project. It attributed the EPC (engineering procurement and construction) company’s financial troubles to non-payment of receivables and slowdown in the infrastructure sector, assuring that funds would not be a problem.
“The Resolution Professional can also raise interim finances, with the approval of creditors, to ensure smooth operations,” the letter said, adding that banks had a large exposure to Lanco — about ₹55,000 crore, and would continue to extend constructive support to help the company’s revival.
Requirement of funds
The first year’s fund requirement for the project has been pegged at ₹561 crore. “The investment would be on a staggered, reimbursable basis,” an official told The Hindu . The Tasra opencast mine is capable of yielding 3 lakh tonnes of prime coking coal in the development stage, in the first year of production (the project is expected to begin in the second quarter of 2017-18) and 40 lakh tonnes of coal by the fifth year, from which 20 lakh tonnes of coking coal could be produced after washing.
SAIL needs about 15.5 million tonnes of clean coking coal annually . More than 80% of its requirement is imported. The requirement will increase to about 20 MTPA once SAIL gets into the 23 million tonnes per annum production post-expansion in 2020. The raw coal output of SAIL’s three captive mines was estimated at 7.6 lakh tonnes in 2016-17. It is in this context that the Tasra project assumes importance for SAIL.
