RPower can’t use Sasan coal for other projects

The power ministry has recommended cancellation of permission to Reliance Power to use surplus coal from mines attached to the 4,000 MW ultra mega power project at Sasan in Madhya Pradesh to another group power plant in the state, as it is concerned about CAG’s views on the matter. If the recommendation is accepted by the Empowered Group of Ministers (EGoM), headed by finance minister Pranab Mukherjee, it would hurt the company’s planned 4,000 MW Chitrangi project, where it plans to use surplus coal from Sasan. The power ministry wants to hand over surplus coal from Sasan to a subsidiary of Coal India at a price the government would determine. The ministry, which was involved in the 2008 decision to allow Reliance Power to use surplus coal from Sasan for another project, quietly made this recommendation to the EGoM earlier this month but has not publicly stated its views. The EGoM has sought the attorney general’s views on the matter. The power ministry’s recommendation could mean revoking permission to divert 4 million tonnes of coal a year to Chitrangi from Moher and Moher Amlohri Extension mines, which together can produce 20 million tonnes against the UMPP’s requirement of 16 million tonnes; and casts a shadow on the mining licence for Chhatrasal block that can produce 5 million tonnes a year. Government auditors have estimated that the benefit of surplus coal amounts to Rs.42,000 crore over 25 years.

These coal blocks were part of the power purchase agreement and the bid documents, and have also been securitised for Sasan UMPP finance from international lenders. Further, output of 20 million tonnes from the two blocks is the peak production, not the regular output needed for Sasan. Coal from Chhatrasal block is needed for the project. Any change would violate bid conditions and would lead to renegotiation of the contract. According to Government officials the contract was awarded much before the company was allowed to use surplus coal for other plants. However, the government of India has defended the award of Sasan contract and use of surplus coal for other projects both in the Delhi High Court and the Supreme Court of India. The power ministry has told the EGoM that the state government is concerned about the delay in signing power purchase agreements for Chitrangi. The company had signed a preliminary agreement with Madhya Pradesh in 2008 to supply 1,241 MW of power from Chitrangi at about . 2.45 per unit.