The ministry has agreed to divert the existing coal linkages of the Satpura project to Pench Power Ltd (PPL). As a result, the additional cost burden on account of freight cost of coal to be supplied to Satpura has been estimated at over Rs 100 crore a year.

Official sources confirmed that the approval has been accorded by the coal ministry at a meeting held last week following a recommendation to this effect by the Madhya Pradesh Electricity Board (MPEB).

It is significant to note here that whereas the existing coal linkages to Satpura plant, owned by the MPEB, are being provided from the coalfields situated at pithead, the new supplies, after diverting the present ones to Pench, would come from other mines of Coal India Ltd (CIL), all of which are at least 700 kmsaway from the project. The additional freight cost would now have to be borne by MPEB.

It goes unexplained as to why MPEB recommended so strongly the proposal of giving away the source of coal, supplying to a public sector power plant, with subsidy of Rs 50 crore per year (estimated loss of the mines supplying to Satpura at this stage at the notified price) to a new private sector power project.

Officials said the MPEB has itself recommended on transferring the coal linkages of Satpura to the Pench project. In a recent letter addressed to the P K Banerjee, additional secretary (coal), MPEB chairman S K Dasgupta has recommended that the mines which are supplying coal for Satpura thermal power station on notified cost basis be utilised by Pench Power Ltd and that Satpura can be given equivalent linkages from CIL.

The standing linkage committee had earlier accorded coal linkage of 1.86 mt per annum to PPL after the latter agreed to pay a price of coal on a cost plus basis which as per the CIL/WesternCoalfields Limited (WIL) quotation comes out to be Rs 1124 mt.

However, officials informed that even after repeated attempts, when MPEB could not convince WCL to supply coal to Pench at the notified price, the board then proposed to transfer coal linkages of its own Satpura power station to PPL at a notified price of Rs 627 per metric tonne.

Officials explained that this has been done because while accommodating PPL for the escrow cover, the project cost was worked out by MPEB on the basis of notified price of coal.

However, if coal cost is calculated on a cost plus basis, the project cost would have gone up substantially. As a result of higher cost, it would have even become doubtful for the project to have got a escrow cover, given on least tariff basis.

It may be recalled that Pench Power had remained unviable since 1984 when MPEB first conceived it and later the Birla group tried to put it up. The reason, even then was that the availability of coal from local mines has been uncertain, the mineshaving been depleted.

CIL/WIL have always maintained that they are willing to open new deep underground mines but then the project has to pay the extra cost and the long term agreement can be only on `cost plus basis'. This had even been agreed in an MoU between MPEB and WCL and also stated in the coal linkage granted by the coal ministry to Pench Power in 1997.