Tata Power Company [Get Quote] has moved the Delhi high court challenging the government's decision to allow Anil Ambani-led Reliance [Get Quote] Power to divert coal from the captive mines of Sasan Ultra Mega Power Project for use in other projects.

Terming the government's decision as 'arbitrary' and 'illegal,' TPC -- one of the bidders for the Sasan project -- said that the government should be directed to produce all records along with the Letter of Intent issued to RPower on August 1, 2007 for the Sasan UMPP.

Besides, it also sought documents of other consequential contracts entered into between them including power purchase agreement, as it claimed that other bidders were not aware of the provision to use coal from captive mines for other projects.

"Arbitrary and illegal actions of the Respondents (Coal Ministry and PFC) in granting approval to divert coal from the captive coal mines of Sasan UMPP to RPower-successful bidder-for use in other projects is completely contrary to the express terms of the Bid Documents disclosed to all the bidders in the Bidding Process and changes the entire operating economics of Sasan UMPP," TPC said in its petition.

"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.

The company further submitted that as per 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 RPower for exclusive of the plant.

In its petition, TPC further submitted that the government of Madhya Pradesh, where the project is located, recommended the Centre to permit RPower to use 'alleged extra coal available' for its other 4,000 MW project being developed in the state at Chitrangi.

On this basis, RPower sought permission from the Centre and the matter was refereed to an Empowered Group of Ministers (EGoM). The EGoM suggested that extra coal could be sold on the condition that additional power generated by it should be sold also through a tariff-based competitive bidding route, submitted TPC.

The matter was again considered by the EGoM on August 14, 2008 and RPower was permitted to use 'incremental coal' quantity, subject to compliance with the said condition.

Rejecting EGoM's recommendation, TPC submitted, "The 4,000 MW power generation project being developed by RPower at Chitrangi is not through the competitive bidding route at all, but was through the MoU route in which about 37.5 per cent power generated from the Chitrangi Project is assured to be supplied to the State of MP at a regulated tariff."

TPC, which was one of the bidders of Sasan UMPP, further contended 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 the coal available from the allocated captive mines was for the project only, and not for any other power generation projects.

"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," TPC further submitted.

". . .in a hugely advantageous situation in all future bidding of power in that the TPC... it may be required to source its fuel at market prices, whereas RPower has a ready source of cheap coal which was originally allocated to them for the Sasan UMPP," submitted TPC.