Government cancels coal block linked to Reliance Power’s Sasan UMPP

NEW DELHI: The government has decided to cancel a coal block attached to the Sasan ultra mega power project of the Anil Ambani group in line with the Supreme Court's directive forbidding commercial use of surplus coal from such units for other plants.

The decision, which also forbids the use of coal from other mines of the 4,000 MW project for other plants, ends the special dispensation given earlier to Reliance Power's Sasan Project that would have helped the company fuel the Rs 21,000 crore Chitrangi power project.

Top government sources said power, coal and renewable energy minister Piyush approved de-allocation of one of the three mines attached to Sasan on Thursday and also disallowed the use of surplus coal from the remaining mines. Reliance Power had won three of the four ultra mega power projects (UMPP).

It recent pulled out of the Rs 36,000 crore Talaiya project, while the Krishnapatnam project has also not progressed as the cost of imported had risen sharply. "The government's approach is to strictly abide by the rules for national interest, irrespective of the parties involved in the decision.

The public accounts committee of parliament had also made observations about the use of surplus coal," a government official said.

The Supreme Court, which cancelled coal mines allocated to various companies, had also ruled on August 25 last year that "coal blocks allocated for UMPP would only be used for UMPP and no diversion of coal for commercial exploitation would be permitted." This prompted the coal ministry to take a fresh look at mines attached to UMPPs.

"The decision has been taken in view of the Supreme Court order of August last year. The government has decided to withdraw the dispensation given to Reliance Power for use of surplus coal. The Chhatrasal coal block has been de-allocated as it is surplus and use of coal in Moher and Moher Amlohri coal blocks that are already operational will be restricted to Sasan UMPP," a senior coal ministry official said. Another ministry official said the government is yet to work on modalities to restrict use of surplus coal in Moher and Moher Amlohri coal blocks that are operational. The ministry is examining options like revising the approved mine plan or asking Reliance Power to sell the surplus coal to Coal India Ltd at a notified price for that grade.

Reliance Power did not respond to an email sent by ET.

The 4,000-MW Chitrangi power project was proposed to be fired partly on five million tonnes per annum from Chhatrsal mine and four million tonnes incremental coal from Moher and Moher Amlohri mines. The company's website said it has sought supply from Coal India for the plant being built next to Sasan UMPP.

Reliance Power was allowed to use the incremental coal from Sasan UMPP in 2008 by an empowered group of ministers, headed by Pranab Mukherjee, who was then India's finance minister.

After winning the Sasan contract in 2007, Reliance Power had told the government that it will be able to mine 25 million tonnes per annum of coal from the three blocks attached to Sasan through use of latest mining technologies, nine million tonnes more than the UMPP's requirement.

The government had allowed Reliance Power to use the incremental coal on conditions that it would be used only for generating electricity to be sold at a tariff derived through competitive bidding. The government's decision to cancel mining licence for Chhatrasal coal block comes soon after the company decided to quit another ultra mega power project at Tilaiya in Jharkhand.

The company on Thursday approached the Delhi High Court seeking refund of their bank guarantee for coal blocks attached to the 4,000-MW Tilaiya UMPP. The court heard the matter the same day and asked the coal ministry to look into the matter on merit basis.