An Indian company that is the most senior lender to an embattled West Australian coal mine is receiving money from taxpayers, despite state government assurances it would not allow a bailout package to leak offshore.

Sindhu Trade Links, a little-known conglomerate based near the Indian capital of Delhi, became the highest-ranked creditor to Griffin Coal when it loaned the struggling miner $US60 million ($90 million) in 2015 through its Australian arm, Oceania Resources.

Griffin is one of only two WA coal miners and it supplies the 434MW Bluewaters power plant, which generates about 10 per cent of the power used in the state's main grid.

However, Griffin fell into receivership in September 2022 as it buckled under the weight of mounting losses and crippling debts of about $1.5 billion.

Most of that debt is owed to India's biggest privately owned bank, ICICI.

'Baffling' loan

Yet in a move that was described as baffling by observers at the time, ICICI provided the money that Sindhu loaned to Griffin.

In doing so, ICICI subordinated its own much larger claim.

Amid the messy fallout from Griffin's failure, which threatened to take down the grid, WA Premier Roger Cook threw the coal producer a $220 million lifeline in late 2023.

At the time, the government insisted the money would not be used to pay down the debts owed to Indian creditors including ICICI and Sindhu.

"The grant funding is designed to help stabilise Griffin's Collie operations and provide certainty to the local workforce," a government spokesman said at the time.

"There are agreed parameters to the funding, which do not include debt repayments."

Despite this pledge, financial reporting in India shows Sindhu Trade Links has been receiving regular payments linked to coal production at Griffin, slashing the amount it is owed by a quarter.

According to a report from India Ratings & Research, a subsidiary of global ratings giant Fitch, Sindhu — through Oceania — is collecting about $US1 million ($1.5 million) a month under an arrangement with Griffin and "involved parties".

"[India Ratings & Research] expects the principal outstanding to further reduce to $USD30 million-35 million by June 2026, as per the arrangement," the ratings agency reported.

Thanks in part to the payments being made to Sindhu, India Ratings & Research lifted Sindhu's credit score from so-called junk status — which implies the company is at a high risk of failure — to an investable grade.

'Hush money' claim

Back in Western Australia, the government appeared to confirm payments were being made to "secured creditors".

In parliament, it was revealed the government had so far paid $14.8 million to "ICICI Bank Limited as the agent for the secured creditors".

But the state also distanced itself from the ultimate use of the money, saying it was "not a party to the distribution of payments between the creditors".

Revelations about the payments come as the clock ticks down on the government's stated deadline for its support of Griffin.

Under the deal, the state has committed to subsidising Griffin's operations until the end of June next year.

It originally said the bailout would cost $220 million — a figure which has since blown out to $308 million.

Shadow energy minister Steve Thomas labelled the creditor payments "hush money", saying the government was using taxpayers' cash to keep creditors onside.

Dr Thomas said the payments were likely to total more than $30 million by next June — almost 10 per cent of the total bailout package.

"The secured creditors of Griffin are going to receive about $30 million out of the $308 million that taxpayers are pouring into the black hole that is Griffin Coal," Dr Thomas said.

Mining and Energy Union WA secretary Greg Busson was more sympathetic.

He said Griffin was still an integral part of the state's economy and grid, supplying both Bluewaters and a giant alumina refinery owned by South 32, as well as industrial companies such as cement makers.

Until other, viable options arrived, propping it up would be a "nasty" reality, he said.

"We need security of supply so their hands were tied," Mr Busson said.

"It is the price of keeping lights on and making sure that we've got consistent, good quality ... base load power."

The state government declined to answer questions about the creditor payments.

According to Mr Busson, the need for Griffin would extend beyond the government's self-imposed deadline for a commercial solution of next June.

To that end, he noted the market operator's decision last week to bank on Bluewaters's availability beyond 2027.

Given the state's vow to close down its own two remaining coal-fired power stations by 2029, he argued it was obvious that Western Australia's two coal mines would have to merge.

Dr Thomas doubted the government would be able to extricate itself from the situation.

"That means that $308 million is not the end of the subsidy from the state government," Dr Thomas said.

"They'll be putting their hand back into taxpayers' pockets for more money, or the energy grid is going to start to struggle."

Ultimately, Dr Thomas questioned why taxpayer money was being used to offset the losses made by foreign bankers — investors who had made terrible bets.

"If Griffin Coal was profitable, then these companies could quite rightly expect to get a dividend out of it," he said.

"When Griffin Coal continues to lose $7 million a month and it is propped up by the taxpayer, I don't think the investors should be receiving a dividend.

"But they are."