Coal Ministry Prohibits R-Power From Coal Mining At Sasan UMPP

Countries second Ultra Mega power plant (UMPP) Sasan has received another setback after Coal Ministry has asked Reliance Power to stop mining from the coal blocks allocated to the projects. Sasan UMPP, when commissions will be the second UMPP to commission after Tata’s Mundra UMPP. Reliance Power, which is developing this project, is also building another two UMPPs namely Krishnapattanam and Tilaiya. All the 4 UMPPs which we have mentioned are facing hurdles despite the country facing power outages.

The 3,960 MW Sasan UMPP is based on domestic coal and has received coal linkage from Moher and Moher-Amlohri Extension coal blocks. The UMPP was connected to the national grid in the last month and has already commissioned the switchyard. The first unit of the project is near to the completion as per the press release issued in the last month. Reliance Power is facing many issues at its upcoming projects like low tariff, fuel security, etc. Company has started coal production from the coal blocks in the last month. The block has a potential capacity of 20 million tonnes per year. Sasan project unit I is expected to commission by end of the year. The electricity tariff from this project will be Rs 1.19 per unit and is the lowest in the country.

The company has received an approval from the government to set up another UMPP as it holds excess coal at the coal block. The company is also developing 4000 MW Chitrangi power project in Madhya Pradesh. Tata Power has objected this decision saying that the coal from these blocks is allocated to Sasan project and cannot be diverted to another project. The Delhi high court has dismissed Tata Power’s petition and the decision is now pending in the Supreme Court.

After the coal diversion issue, the coal ministry now has asked Reliance Power to stop the coal mining from the blocks as the company does not own the land surrounding of the coal blocks. The ownership of the land surrounding the coal blocks is being held by the Northern Coalfields. Reliance has started activity like removal of overburden. Reliance power has denied saying that the things are normal and the coal production is not being interrupted. Reliance Power also said that in 2011 NCL has given no-objection to its proposal of transferring all the coal bearing land to Reliance Power and these things have been resolved.

Reliance Power is expecting to have a 5000 MW operating capacity by end of the year. Currently it has operating capacity of 1540 MW. In the last quarter company put in good numbers with sales doubling to Rs 1136 crore while net profit growing by 23 per cent to Rs 240 crore.

The Sasan project has the lowest tariff rate and the company does not seem to have any issue on the same. The project has received about USD 2 billion of funding from the foreign banks.  Its Krishnapatnam is facing financial woes along with lower tariffs while Simalcoat project has not received gas linkages. The future of the coal linkage of Chitrangi project depends upon the decision of Supreme Court. It is not clear if the Coal ministry’s decision will have any material impact on the commissioning of the Unit I of the UMPP. Under such circumstances one has to take a wait and watch approach until a matter is resolved.