UMPP and surplus coal

The Comptroller and Auditor General has made yet another report on Reliance Power diverting the coal from mines allotted for UMPPs (Ultra Mega Power Project). R-Power has diverted coal from its mines at Kerandiri (Jharkhand) and Moher-Chatrasal (Madhya Pradesh) for its other projects. The report talks about issues of provision for diversion in bidding and allotment documents and estimation of financial implications.

We shall look at the core issue - Should coal diversion be allowed?

In principle, all activities which are economically viable and environmentally non-destructive shall be allowed. Coal is a natural resource to be used for development of the nation. Ideally, coal should be used for nearby power and industrial areas. However, if these are not in place, coal may be diverted to where it can be used.

Now adding a second layer to the argument, should coal be diverted when it has been allotted a specific purpose - i.e. operation of UMPP and supply of power. What if R-Power declares after 10 years, that they have run out of coal and hence can't supply power for next 15 years, unless additional coal mines are allotted. This would then imply that R-Power is using cheap coal to sell costly power (from its other projects) and denying the public of cheap power (from UMPP).

Another, thought could be that Reliance is utilizing the proceeds of coal diversion to fund building its UMPP. As long as Reliance does not go back on its contract and if bid documents allow it, coal diversion from UMPP or any other mines shall be allowed.