Fate of Mahan coal block in MP hangs in balance

With the Supreme Court reserving its verdict on cancellation of coal block allocations, the fate of Mahan Coal Ltd - a joint venture between Essar Power and Hindalco in Madhya Pradesh - hangs in balance as it does not feature on the list of 46 coal mines the government has requested Supreme Court to not cancel.

Two major projects, Essar's 1200 MW power plant and Hindalco's aluminum smelter plant, in Singrauli district of Madhya Pradesh were depending on Mahan coal block as source of fuel. The cost of production will go up if the Mahan coal block is cancelled as the companies are importing coal at present.

Mahan Coal Ltd is an equal joint venture between Essar Power and Hindalco to develop coal mines in Mahan forests in Madhya Pradesh. The companies have invested about Rs 20,000 crore in the projects and are awaiting final mining lease from the state government. While the power project and aluminum plant are already operational, the input costs will shoot up without captive coal as transporting coal from other regions to land-locked Madhya Pradesh will increase logistics cost.

Mahan coal block does not find a mention in the list of 46 coal blocks, according to data available on coal ministry's website. When contacted, a spokesperson from Mahan Coal Ltd declined comment.

The Supreme Court on Tuesday reserved its verdict on cancellation of 218 coal blocks which were declared as illegal by it. While the government has said that it favours the cancellation of coal blocks allocations which were declared as illegal by the Supreme Court, it has also requested the court to exempt 46 mines where production of coal has already started or is about to start before 2015. The list of the companies was submitted by the government in its affidavit filed on Monday.

Hindalco Industries Ltd is importing coal for its aluminium plant amid lack of clarity on when the Mahan coal project may be cleared. The targeted capacity of coal production from Mahan coal block is 8.5 MTPA (million tonnes per annum) out of which 5.1 MTPA coal will be supplied to Essar and 3.4 MTPA will be supplied to Hindalco.

Mahan Coal Ltd has already secured Stage II forest clearance from union ministry of environment and forests but needs to sign a mining lease agreement with Madhya Pradesh government before commencing mining operations. It will take about nine to 12 months to make the block operational once it gets the permission, sources said.