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MP debars Lanco for 5 years for reneging on pact

This action,the MP Government said,is without prejudice to all future legal proceedings in the case.

Written by Anil Sasi
New Delhi | March 3, 2012 12:51:32 am

In a strong penal action,the Madhya Pradesh Government has debarred Lanco Power and other Lanco Group firms from bagging contracts or business in the State for a

period of five years.

The state government has cited an “illegal act” on part of Lanco Amarkantak Power (now Lanco Power Ltd) to “abruptly terminate” a pact to sell 300 MW of power to it from a thermal station in Pathadi,Chhattisgarh and instead routing the electricity into the grid to cash in on rising short-term power prices.

“The reasons for the illegal act on the part of Lanco Amarkantak/Lanco Power was to make unlawful gain in view of the rise in the price of power in the short-term and more particularly the very substantial increase in the Unscheduled Interchange charges (UI charges) payable for injection of power when the grid frequency is low,” the Madhya Pradesh government has said in a communication to Lanco Power on February 14.

This action,the MP Government said,is without prejudice to all future legal proceedings in the case.

Lanco Amarkantak had entered into a power purchase agreement (PPA) with power trader PTC India in May 2005 for sale of 300 MW from the Pathadi station,with Madhya Pradesh being the indentified purchaser.

While the matter was still in the process of getting regulatory approval,Madhya Pradesh has alleged that the Lanco firm “abruptly” terminated the pact with PTC India,resulting in the state losing out on the contracted power.

According to a government official involved in the exercise,after termination of the PPA,Lanco pumped in electricity generated by the unit into the grid for one full year by the simple expedient of not declaring its plant ready for commercial operation.

In late 2010,taking a serious view on this,the Central Electricity Authority noted that the 300-MW second unit of the Lanco Amarkantak station was synchronised on May 1,2009,achieved full load on June 4,2009,but had not been declared ready for commercial operation for more than one year,during when it went on injecting the entire capacity into the grid.

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