The ambitious bid of the Tatas to develop a coal-to-liquid (CTL) project in Odisha at an estimated cost of Rs 45,000 crore has got a huge setback with the Coal ministry de-allocating the North of Arkhapal Srirampur block allocated for the CTL project.

The block was allocated to Strategic Energy Technology Systems Pvt Ltd (SETSL), a joint venture between a consortium of Tata and Sasol of South Africa.

The ministry's harsh action follows the recommendation of the inter-ministerial group (IMG). The IMG observed that the allocatee had only submitted the bank guarantee and had not obtained any clearance. The IMG headed by additional secretary (coal), is mandated to oversee development of allocated coal blocks and recommend action, including de-allocation, if required.

Though four and a half years have lapsed since the allotment of the coal block, the developers were even unable to procure prospecting license (PL), the first step towards coal mine development.

"It has been decided to de-allocate the North of Arkhapal Srirampur block in the state of Odisha allocated to SETSL. The company shall not be eligible for allocation of coal block in lieu of the de-allocated coal block. Accordingly, the bank guarantee to the extent of Rs 55.34 crore be invoked and deposited with the government in the relevant head of the account”, S K Shahi, director, Ministry of Coal wrote to managing director, SETSL.

The IMG observed that critical milestones like preparation of geological report, mining lease application, submission of mining plan, approval of mining plan, application of forest clearance, application of environment management plan (EMP) clearance and completion of land acquisition are still pending.

In June 2013, the Coal ministry had issued a showcause notice to SETSL, raising concern over the inordinate delay in developing the coal block.

The office of the Coal controller conducted field observation of the CTL block in December 2012. It did not find any presence of mining equipment nor any sign of mining activity. While there was no information on engagement of mine developer cum operator, no escrow account was opened by the developers for mine closure.

The Odisha government had issued PL order in March 2012 for the CTL block. But PL deed was yet to be executed.

Earlier, the Parliamentary Standing Committee on steel & coal had questioned the basis of allotment of the two blocks to privately run firms instead of state PSUs.

SETSL had proposed the CTL project at an undecided location in Dhenkanal district at a cost of Rs 45,000 crore. With a production capacity of 80,000 barrels per day, the project promised about 6400 direct jobs.