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UMPPs can use surplus coal only for captive units: SC

The Supreme Court has disallowed commercial mining and the use of surplus coal for all purposes other than captive use by ultra mega power projects (UMPPs).

The ruling has implications on another case pending before the apex court, one involving Tata Power, Reliance Power and the government. In 2008, the coal ministry had allowed Reliance Power to use surplus coal from the 4,000-Mw Sasan UMPP for the company’s 3,980-Mw power project based in Chitrangi, Madhya Pradesh. The decision to divert surplus coal after the bidding was challenged in a high court by Tata Power, which was also in the running for the Sasan UMPP. Tata Power told the court diversion of surplus coal was detrimental to public interest.

After the high court turned down its plea, Tata Power moved the Supreme Court.

The peak cumulative production of three mines allocated to Reliance Power in Sasan is 25 million tonnes (mt) a year. The Sasan power project’s annual requirement is 16 mt, a surplus of nine mt a year.

Reliance Power declined to comment on the matter.

In a report on UMPPs in 2012, the Comptroller and Auditor General had said, “The permission to use surplus coal in other projects of the bidder after award of the contract based on acceptance of the lowest tariff, vitiated the sanctity of the bidding process, which would result in post-bid concessions to the developer with significant financial implications.”

Reliance Power had signed a power purchase agreement with seven regions – Madhya Pradesh, Punjab, Uttar Pradesh, Delhi, Haryana, Rajasthan and Uttarakhand – at 70 paise a unit. It was to sell power at Rs 1.19 a unit. But a recent order by the Central Electricity Regulatory Commission had withdrawn from the company the right to increase rates, owing to delay in commissioning the third unit.

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