Essar Power, Hindalco may set up coal mining JV in MP

Mumbai, Nov 24 | Updated: Nov 25 2005, 08:11am hrs
A grand alliance of sorts is in the making between Aditya Birla Group company Hindalco and Essar Power in the development of the Mahan captive coal mine in Madhya Pradesh. In fact, the proposal for the formation of a joint venture has been mooted by the union coal ministry.

The coal ministry's decision to allot the captive coal mine is in line with the recent initiative of the Centre whereby captive mines are allotted to meet the increasing gap between demand and supply of coal. When contacted, Essar Power and Hindalco have preferred not to comment now.

Essar Power's case for the allotment of the captive coal mine with a capacity of 120 million tonne was recommended by the Madhya Pradesh government to the Centre.

The company has proposed to set up an independent power project with the generation capacity of 1,000 MW in MP by using the coal from the Mahan mines. It had planned an investment of Rs 4,300 crore for the setting up of a power project.

On the other hand, Hindalco, which has proposed to set up an aluminium plant with an investment of Rs 2,000 crore, was allotted the same mines by the coal ministry after it had received recommendation from both the ministry of heavy industries and the MP government. Hindalco has planned to set up a captive power plant to meet its power requirement for the aluminium plant.

Sources told FE: "The coal ministry asked them to form a joint venture in the larger interest of the state and also to make them proceed on the implementation of proposed power and aluminium projects."

Essar has expressed its desire for JV, but wants priority in the allotment of future mines in nearby areas
Hindalco has yet to respond to
coal ministry
JV will need at least 4 years to develop and later start coal production
Allotment of mine is in line with Centre's policy
Sources noted that both these companies had initially shown reluctance to accept the proposal to form a JV. However, Essar Power has communicated to the ministry that it was keen to be party to the proposed JV.

The company has laid down the condition that it should be given preference at the time of allocation of fresh mines in the adjoining areas in future.

Sources said that Hindalco's response is awaited. According to sources, if the JV becomes a reality, it would need at least four years to develop the mine and commission the coal production. These companies have to work out the cost sharing for this purpose.