Govt allows RPower to mortgage Sasan UMPP coal blocks to lenders

Government has approved the request of Reliance Power to mortgage coal blocks attached to Sasan UMPP to lenders of the plant. “The government has approved the request of Reliance Power to mortgage coal blocks attached to Sasan ultra mega power plant to lenders of the plant,” an official said.

“The consortium of lenders, both Indian and foreign, is led by SBI Cap,” he added An inter-ministerial panel had earlier favoured allowing ultra mega power project developers to use coal mines as collateral for raising funds for their projects that aim to provide affordable power to all.

However, the panel headed by Power Ministry’s Additional Secretary (Thermal, Transmission, O&M) Shalini Prasad had strongly recommended against allowing the developers to divert coal from the captive mine allocated to their UMPPs.

“The committee has firmed up its view... There is a broad consensus that the UMPPs can assign or mortgage their coal mines to their project lenders,” a source had earlier said.

The committee set up by the Coal Ministry was of the view that in case the mine is assigned or mortgaged, the coal should not be allowed to be diverted for other projects, the source had said, adding that this will ensure smooth functioning of these UMPPs which are set up with an aim to provide cheaper power to consumers.

The committee was set up following differences between coal and power ministries on whether an UMPP can be allowed to assign or mortgage its coal mine or not.

The panel, which also has two joint secretaries (coal and thermal) from the Power Ministry and one from the Ministry of Law, took up the issue after Reliance Power’s application seeking nod to use its coal mine allocated to Sasan UMPP as a collateral was rejected by the Coal Ministry.

The rejection was communicated to the Madhya Pradesh government. In case UMPPs are allowed to use their coal mines as collateral, it will help them raise money smoothly to run their plants.

The main purpose of setting up of UMPPs is to make available cheap affordable power for all. 

Thus, these projects are allocated through a single-window mechanism with all mandatory permissions and tying up required resources like land, coal and water before hand to set up and run plants seamlessly.

The government has earlier asked Reliance Power to restrict production from its coal mines in Moher and Moher Amlohri Extension blocks - linked to its Sasan UMPP - to 16 million tonnes per annum (mtpa) from the current 20 mtpa.