The Power Ministry is believed to have shelved the plan to set up a Rs 20,000-crore ultra mega power project at Sarguja in Chhattisgarh as the coal blocks for the proposed project fall under dense forest area and could rake up the environment issue.

Sources in the Power Ministry told PTI, 'The proposal to set up the 4,000 MW ultra mega power project (UMPP)at Sarguja in Chhattisgarh has been dropped.'

The coal block allotted for the project falls under the area of dense forests and therefore likely to have an adverse impact on the environment, sources said.

The process for the invitation of initial bids for the Sarguja UMPP has been delayed many times in the past due to lack of environment clearance for the allotted coal mines.

The Ministry of Environment and Forests had classified the Hasdeo-Arand coal blocks, allocated to the proposed 4,000-MW plant, as no-go, which meant that mining cannot take place in those mines as it may cause damage to the environment.

However, a committee headed by Planning Commission Member B.K. Chaturvedi, in its report, expressed reservations on the legal sanctity of 'no-go'. A Group of Ministers (GOM) constituted for tackling environment issues impacting power projects accepted the suggestions of the Chaturvedi panel.

'But the Ministry of Environment and Forests has not allowed mining at those mines,' sources added.

As per the guidelines of power sector regulator Central Electricity Regulatory Commission, the exploration work at the coal blocks allotted for the UMPPs should start within 730 days of the Coal Ministry’s approval. This deadline expired in March 2012.

Power Finance Corp, the nodal agency for the UMPPs in the country, has so far allotted four such projects. The three have been bagged by Reliance Power — Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand).

Tata Power has commissioned the country’s first imported coal-based ultra mega power project won through international competitive bidding.