A 50:50 joint venture (JV) firm of Aditya Birla Group flagship Hindalco Industries and Essar Power, Mahan Coal Company (MCC), is all set to start coal mine development in December at the Mahan block of Sidhi-Singrauli fields in Madhya Pradesh, following the allotment of mine by the Centre.

The development of the field is expected to be completed by '09. After that, coal production will begin to fuel the proposed power plants of both Essar and Hindalco.

Essar Power is investing Rs 4,000 crore for a 1,000MW power project in the state, while Hindalco is setting up a 750-MW captive power plant with an estimated investment of Rs 2,400 crore.

Both greenfield power plants are expected to start production by '10. To source coal for the power plants, both companies had signed a shareholders' agreement and formed MCC.

When asked about the development, officials from both companies preferred not to comment.

Sources said, "Essar is planning to generate power for trading in Madhya Pradesh and the surrounding states. While Hindalco will route the power to its proposed 3,25,000 tonne per annum (TPA) aluminium smelter in Madhya Pradesh at an estimated cost of Rs 7,700 crore. MCC has started the field study at Mahan to prepare detailed report to support the mining procedure."

As per the lease agreement, Essar will use 60% of the coal output and Hindalco will take the remaining 40%. The mine, with proven reserves of 150m tonne of coal, will cater to the combined Rs 6,400 crore power projects being set up by the two conglomerates.

"We had sent a formal proposal to the ministry jointly. Recently, the government has taken a decision to allocate mine to MCC. The plants are expected to produce power at 70 paise per unit, as the coal will be mined from captive deposits,"the sources added.