January 18, 2011 / 1:02 PM / 8 years ago

UPDATE 1-India ministry sets terms to consider Lavasa approval

* Ministry asks HCC’s Lavasa to stop construction

* Asks Lavasa to pay penalty, set up restoration fund

* Court hearing on Jan 28

MUMBAI, Jan 18 (Reuters) - India’s environment ministry on Tuesday said it could consider approving Hindustan Construction Co’s (HCNS.BO) Lavasa project on conditions that included a penalty payment and the setting up of a restoration fund.

The ministry has asked for construction to be halted at the hill-side project in western India, saying it was environmentally damaging and violated environment laws.

Lavasa’s plan to develop a 1.4 trillion rupee ($31 billion) project to build a hill station outside the city of Pune city has run foul of India’s increasingly assertive environment ministry over violation of green rules.

On Tuesday, the environment ministry said on its Web site it could consider approving the project because of investments already made, third party rights, employment generated and steps taken to set up a comprehensive hill station development.

The conditions include Lavasa paying a substantial penalty for violating green laws, creating an environmental restoration fund, and preventing further environmental degradation.

It also asked Lavasa to submit all plans and audited accounts of money already spent, and its future investment plans.

“Our legal team is looking into the matter. We will decide our future course of action accordingly,” a Lavasa spokesman told Reuters.

Analysts said they saw no long-term damage to the companies, but the stocks could be hurt in the short term.

The ministry issued a notice to Lavasa on November 26 asking why construction should not be demolished, which has been challenged by the company in a Mumbai court. The court will decide on the case by next month.

The next hearing in the matter is scheduled for Jan 28.

The controversy has already delayed Lavasa’s $450 million initial public offering, with environmental clearances held up.

For a link to the federal ministry order, click: here 12011.pdf (Reporting by Prashant Mehra; Editing by Jui Chakravorty)

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