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Bank guarantees of Lanco, 13 others encashed for missing deadline under India’s national solar mission

Bloomberg had reported earlier this month that, Tarun Kapoor, renewable ministry joint secretary has said that about 120 megawatts of solar photovoltaic plants were completed by their January deadline.

However according to reports, with companies missing deadline for the National Solar Mission, NTPC Vidyut Vyapar Nigam (NVVN) has encashed bank guarantees of 14 project developers including Lanco Infratech, Aftab Solar, Amrit Engineering and Alex Solar. Of the 14 projects, Lanco is engineering procurement and construction (EPC) contractor in three.

The action follows with 14 project developers failing to meet the commissioning deadline under the first batch of phase I of the national solar mission. Besides, the Ministry of Corporate Affairs, which is represented in a three-member committee probing the issue of floating of front companies, has simultaneously started gathering information on the status of companies accused for flouting the norms.

An NVVN official said that in terms of strict compliance of the guidelines bank guarantees of these developers have been encashed for not commissioning the projects by January 9 deadline. Tarun Kapoor, Joint Secretary in-charge of National Solar Mission in the Ministry of New and Renewable Energy, has confirmed this. The amount encashed would be close to Rs 28 crore. The penalty for each project averages out to approximately Rs 2 crore.

An investigation by CSE revealed that the guidelines were circumvented by LANCO Infratech, the flagship of the LANCO Group. According to the investigation, Lanco Infratech floated front companies and grabbed nine projects worth 235 megawatt sanctioned during the first batch of the first phase

These projects are spread across the country — Rajasthan, Orissa, Andhra Pradesh, Karnataka, and Tamil Nadu. Sources said that NVVN has relied on the commissioning reports furnished  by the State Nodal Agencies.

After this initial warning, the developers have been given two months’ time to finish the project, and if they are unable to do so, this would entail further loss of bank guarantee – thereafter, three months’ time has been provided with penalties to complete the project, failing which the project would stand removed from the Mission. In effect, the total extension in this manner extends up to six months beyond the scheduled date.

NVVN, the power trading arm of NTPC, has been designated the nodal agency for sale and purchase of grid connected solar power under Phase-1 of the Mission. Under the first batch, 35 new projects were expected to generate 610 megawatt of solar power (140 megawatt of photovoltaic and 470 megawatt thermal) and grid connectivity was expected by January 2012. Generation from new photovoltaic projects were to commence from this January and thermal by May 2013.

The government had recently formed the three-member committee to probe into the contravention of one project-one proponent norm in the Mission brought out by the Centre for Science and Environment (CSE) investigation. The committee would submit its report in a month’s time. The first meeting of the committee took place on January 17 where CSE made a presentation.

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