The coal ministry has asked the power ministry to review allocation of coal bocks to companies, and argued that electricity costs would have been lower if mines had been given to Coal India Ltd (CIL), which extracts fuel at half the declared mining cost of firms such as Reliance Power Ltd.
The ministry has specifically cited the case of coal blocks attached to Reliance Power's 4,000-MW Sasan Ultra Mega Power Project (UMPP), where the company will mine coal at a cost of 919 per tonne compared with CIL's 450 per tonne in an adjoining block.
A Reliance Power spokesman said what matters is the power tariff, not the mining cost. "The cost of coal is not relevant for any of our coal mines as we are not selling coal but supplying power at most competitive tariffs. The historic landmark tariff from Sasan ultra mega power project at 1.19 per unit signifies the efficiency in coal production and power generation brought in by Reliance Power. This tariff would benefit 35 crore Indians in 14 distribution companies in seven states," he said.
The coal and power ministries have written several letters in recent weeks since the leaked draft report of the Comptroller and Auditor General (CAG) created uproar and triggered a debate about large blocks given to companies of leading business houses such as the Anil Ambani group, the Tatas and the Jindals.
The draft report estimated that the blocks given free to various firms contained coal worth 10.7 lakh crore. In one letter, the coal ministry said mining costs of two blocks in the same area can vary substantially.
In a letter dated April 12, coal secretary Alok Perti told his counterpart in the power ministry, P Uma Shankar, that consumers could have benefited had the Moher and Moher Amlohri mines attached to the Sasan UMPP been awarded to CIL.
A senior power ministry official confirmed that Perti had written a letter asking for a review of mining costs of all power companies, including state-run NTPC, for taking necessary actions. "Required steps will be taken," the power ministry official said.
The official said that ironically Perti's views were based on what Reliance Power itself had argued in a presentation following the leaked draft report of the CAG, which estimated that coal blocks given away to private firms contained fuel worth 10.7 lakh crore.The company said in the presentation that it expects the cost of mining to be as high as 1,000 per tonne. The draft report says that Power Finance Corp has considered 431 per tonne as the cost of extraction including royalty per tonne for loan appraisal of Reliance Power's Sasan ultra mega power project.
Perti's letter, also marked to prime minister's principal secretary Pulok Chatterjee, said mining cost from CIL mines is just about 450 per tonne, the coal ministry official said. Northern Coalfield, CIL's subsidiary, operates Amlohri and Nigahi blocks near Sasan blocks.
Although the coal ministry has told the Comptroller and Auditor General that mining cost of no two coal blocks is similar, it believes that there cannot be such wide variation between mining costs of two adjacent blocks, the official said.
In a separate letter to CAG on March 15, coal ministry has said cost of production from blocks depends on many factors and 'varies to a large extent' even if they are located in the same area. The ministry has challenged CAG's calculation of at 10.67 lakh crore undue benefits to companies that have been allotted coal blocks free of cost during 2004-09.
The ministry has said cost of production of CIL mines does not include financing cost of about 100-150 per tonne, which other captive block owners incur. The coal ministry has called for deliberations with CAG before the auditor finalises the report.
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