RPower begins coal production from Sasan UMPP captive block

Says it has responded to the govt, and the land issue has been resolved Coal India arm cries foul

The Anil Dhirubhai Ambani-owned Reliance Power (RPower) started production from captive coal mines allotted for its showcase Sasan Ultra Mega Power Project (UMPP) last month, despite a government directive asking the company to stop mining activities till few formalities were completed.

The matter relates to the issue of transfer of land held by Coal India subsidiary Northern Coalfields Ltd (NCL) to Sasan Power Ltd (SPL), the Reliance Power subsidiary developing the 4,000-megawatt (Mw) project. Even while the two coal blocks — Moher and Moher Amlohri Extension — were handed over to Reliance, it transpired that NCL had already acquired part of the land of the blocks for its own projects.

 

NCL had in July complained to the coal ministry that, even while legal transfer of the land to SPL was awaited, the latter had started overburden removal and dumping on the land vested with NCL under Coal Bearing Area Act. Following this, the ministry, in an August 31 letter, asked Reliance to stop mining till transfer of a part of the land to the company was notified and legal opinion on the matter received. On September 3, a day before its annual general meeting, and four days before an inter-ministerial group was to decide on cancellation of its mining right, RPL announced it had started production and it planned to ramp that up to 20 million tonnes (mt) an annum over four years.

“The coal ministry had asked for the opinion of the department of legal affairs under the law ministry on whether the piece of land under the command area of NCL could be transferred to SPL. The ministry had asked RPower to stop work on that part of the two blocks which was part of the NCL command area till clear legal opinion was available,” a senior official close to the development told Business Standard.

RPower, however, denied any wrongdoing. “We have responded to the the coal ministry, and the issue regarding the land being used for overburden dump and infrastructure area, which is a non-coal bearing area, has been resolved,” a company spokesperson told Business Standard in an email. He added production from the blocks was progressing according to the plan to meet the proposed commissioning of the plant in December.

RPower had justified starting of production in a letter dated September 13, arguing that mining had started only after getting all statutory approvals and clearances. The environment and forest clearances were granted for the blocks in 2008 and 2010, respectively. The mining plan was approved by the coal ministry in March 2009, and consent to operate received from the Madhya Pradesh Pollution Control Board in July 2009. Also, the mining lease was signed with the state government in September 2011.

In an October 2011 meeting between the coal ministry, NCL and SPL, it was agreed the land for overburden removal and infrastructure would be transferred to SPL. “Even NCL gave its no-objection, formally documented in the minutes of the meeting,” the company said in its letter to coal ministry.

RPL also argues the portion of the land over which NCL has raised objection has been notified for acquisition by SPL under the Land Acquisition Act 1894. “NCL raised its objection only at the last stage, when land was being handed over to SPL by the district collector. The company also said it was “extremely surprised” on NCL objecting to SPL using the overburden dump and infrastructure area, a non-coal bearing area, even after agreeing to handover this land to SPL.”

The company further said any hindrance to the development of the blocks at the current advanced stage would severely impact the project cost and rate by affecting the plant’s commissioning schedule. Power supply from Sasan UMPP would result in financial benefit of Rs 120,000 crore to seven states over the 25-year power purchase agreement period due to its “extremely competitive” rate of Rs 1.196 a unit.

The coal ministry had allocated the two coal blocks to Power Finance Corporation, the nodal agency for UMPPs, in September 2006. The Sasan UMPP was transferred to RPower, along with the blocks after rate-based competitive bidding in August 2007.

The Comptroller and Auditor General of India, in its report on UMPPs placed in Parliament on 17 August, had said the government's decision to allow diversion of surplus coal from Sasan UMPP resulted in financial benefit of Rs 29,033 crore to RPower.