The coal ministry has objected to Reliance [Get Quote] Power's plan to sell coal from captive mines awarded for the controversial Sasan ultra mega power project to the Anil Dhirubhai Ambani Group's proposed 4,000 Mw plant at Chitrangi.

The ministry has said the three mines were awarded to the ADAG company on condition that coal from these blocks would be used exclusively by the Sasan UMPP. Both Chitrangi and Sasan are in Madhya Pradesh.

The ministry's views have significance for the government's showpiece ultra mega power programme that involves setting up nine plants of 4,000 Mw each to help bridge India's power deficit.

Four of these, including Sasan, are located at coal pitheads, and the others are coastal projects that will use imported coal.

Opposition from the coal ministry comes despite Madhya Pradesh Chief Minister Shivraj Singh Chouhan taking up the issue with Prime Minister Manmohan Singh.

Although the empowered group of ministers on UMPPs headed by Power Minister Sushil Kumar Shinde has not decided the issue, it has sought details from the state government on how the Chitrangi project is structured in terms of ownership, how the developers want to sell power and the tariff at which electricity is to be sold, an official said.

The Chitrangi project requires an investment of Rs 16,000-18,000 crore (Rs 160-180 billion) and its annual coal requirement is estimated at 15 million tonnes.

Sources close to the developments added that members of the ministerial panel are of the opinion that the coal allocated for any UMPP should be first used for the unit.

Any surplus should be used to generate additional power that should be sold through a tariff bidding process.

In the past, Reliance has not ruled out the possibility of increasing the capacity of the Sasan project beyond 4,000 Mw, which will require additional coal. The company did not respond to a questionnaire e-mailed Friday.

The company is, however, planning to fast-track the Chitrangi project. Under the earlier understanding with the Madhya Pradesh government, the project was scheduled to begin only by 2014, sources said.

Sasan, among the first two UMPPs to be offered for bidding, has been shrouded in controversy. Lanco had originally been awarded the project after it bid to generate power at Rs 1.19 per unit.

The bid was later cancelled on grounds that it was declared void from the beginning, following a corporate restructuring.  Reliance was then awarded the bid by virtue of being the next highest bidder.