By Sanjeev Choudhary
NEW DELHI, Aug 17 (Reuters) - Shares in India’s Reliance Power fell more than 6 percent on Friday after the country’s federal auditor said the company unduly benefited from a government decision allowing the power producer to use surplus coal from its captive block for another project it was not meant for.
Reliance Power, controlled by billionaire Anil Ambani, gained 290 billion rupees ($5.2 billion) in undue benefit from the government decision, the auditor said.
In another report, the auditor also accused the government of allocating dozens of coal blocks at a fraction of their market price, costing the exchequer potential revenues of around $33.3 billion.
Indian power producers have been scrambling for cheap local fuel, whose shortage has kept at least 15,000 MW of capacity idle and many plants underutilised.
Reliance Power, India’s second-largest power producer by market value, is developing a 4000 MW project at Sasan in the central state of Madhya Pradesh and was allotted three captive coal blocks to fuel the project, which was bid for at a fixed rate to supply power.
The company later received government approval to use surplus coal from these blocks for the company’s other project - 4000 MW at Chitrangi - which would supply power at a higher tariff than Sasan project.
By using the coal from the same source but charging different tariffs for the power generated at two plants, Reliance gained 290 billion rupees or 118 billion rupees in terms of net present value, the auditor said in a report.
Tata Power, the competing bidder for the Sasan project, had earlier challenged the government’s decision and the matter is pending in the country’s top court.
“There is no vitiation of bid conditions as the bid documents gave the right to the government to permit use of surplus coal,” Reliance said in a statement.
At 0927 GMT, shares in Reliance Power, valued at $4.7 billion, were trading 5.74 percent lower at 87.80 rupees in a Mumbai market that was up 0.21 percent.