New Delhi: The Tata Power Company (TPC) is reported to have taken the government to court over according permission to Anil Ambani's Reliance Power to divert coal from Sasan mines.

Moving the Delhi High Court against the government, TPC termed the government's decision as "arbitrary" and "illegal". The government had earlier decided in favour of allowing Anil Ambani's Reliance Power to divert coal from the captive mines of Sasan Ultra Mega Power Project for use in other projects.

TPC is also one of the bidders for the Sasan project. It has now asked the court to direct the government to produce all records, including the letter of intent (LoI) issued to Reliance Power on 1 August 2007 for the Sasan UMPP, and has sought documents of other consequential contracts entered into between them.

If the court accepts Tata Power's plea, the government could find itself producing documents pertaining to the power purchase agreement. TPC has said that the other bidders of the Sasan project were not aware of the provision to use coal from captive mines for other projects.

In its petition, TPC said that the "arbitrary and illegal" actions of the respondents, including the coal ministry and Power Finance Corporation (PFC), which granted the approval to divert coal from the captive coal mines of the Sasan UMPP to Reliance Power, the successful bidder, for use in other projects is contrary to the express terms of the bid documents disclosed to all bidders during the bidding process.

It says that the move effectively changes the "entire operating economics of Sasan UMPP."

"The petition seeks to challenge... the decision making process as well, by which the RPower was first awarded an ultra mega power project at Sasan on certain specified terms (pursuant to a competitive bidding process) and then radically altered those terms, thereby changing the entire economics of the operation of the said project," contended TPC.

Tata Power is also of the view that according to the terms of the tender for the 3,960 MW Sasan UMPP, its three coal blocks - Moher, Moher-Amlori Extension and Chhatrasal - were allocated to Reliance Power for exclusive use of the plant.

In its petition, the company says that the government of Madhya Pradesh (MP), where the project is located, recommended to the Centre to permit Reliance Power to use "alleged extra coal available" for its other 4,000 MW project under development in MP at Chitrangi.

Reliance Power had sought permission from the Centre, which was referred to an Empowered Group of Ministers (EgoM). The EGoM took the view that extra coal could be sold on the condition that additional power generated should be sold also through a tariff-based competitive bidding route, TPC said.

When the matter was considered by the EGoM again on 14 August, 2008, Reliance Power was permitted to use "incremental coal" quantity subject to compliance with the said condition. TPC rejects the EGoM's recommendation, in its petition, saying that the 4,000 MW power generation project being developed by Reliance Power at Chitrangi in MP is not through the competitive bidding route at all, but was through the MoU route in which around 37.5 per cent power generated from the Chitrangi Project is assured to be supplied to the state of MP at a regulated tariff.

Further, TPC contends, that it had bid for the project on the faith and belief that the terms and conditions had been framed after due consideration and would be adhered to, and that the coal available from the allocated captive mines was for the project only, and not for any other power generation projects.

In its petition, TPC says "Were it known to the TPC that such a dramatic change in the very core of the structure of the Sasan UMPP would be permitted the TPC would have submitted a substantially different bid."

Reports quoted commentators as saying that the moot point here is that Tata Power in fact had the third-lowest bid for Sasan in the bidding process, and that it would hinder unfair benefits to Reliance Power. TPC's petition says the Sasan bidding procedure in fact put Reliance Power, the successful bidder, at a greater advantage in the sense that it could undercut all the power generators and yet make a significant premium on the value of the coal captively raised by it.

Through its petition TPC is reported to be effectively gunning for the cancellation of the award of the Sasan ultra mega power project to Reliance Power, and try and force the union government, the power ministry and the coal ministry to direct a re-tender of the project.

Reports also suggested that this petition could potentially impact the Tilaiya bid as well, which has around 972 million tonnes of coal, and 86 per cent more coal reserves than acquired.