The defence ministry has cleared the location of the captive coal mine for the 1,080 mw Bhadrawati fast-track power project in Maharashtra.
The mine is adjacent to the Chandrapur Ordnance Factory which makes explosives.
The project's promoters, the Ispat group, would have had to rework the power purchase agreement if the mine was relocated.
But with the defence ministry clearance, the price of power to the state electricity board will not need significant change.
Although the government has cleared the present location of the mine, the promoters cannot carry out any blasting within three km of the ordnance factory. The promoters will use open cast methods that involve explosives.
The promoters stand to lose around a quarter of the mine's coal deposits because of the restriction on blasting.
The government has compensated the promoters for this loss by offering a part of the Kiloni coal block, which is close to the Baranch mines.
The Maharashtra High Court had issued a stay order against the project after the sitting BJP MP from Nagpur, Bhanwarilal Purohit, filed a case against the project.
The promoters were required to get clearance from the defence ministry for their captive coal mine before they proceed with the project.
Explosives experts from the defence ministry evaluated the impact of explosions in the mine on the ordnance factory.
The Rs 5,000 crore Bhadrawati project comprises a captive mine and a power project.
The coal mine is being promoted by Central India Coal Company and the power project is being promoted by Central India Power Company.
