The Ministry of Coal, meanwhile, has served a show-cause notice to the company for delays in production from the mine.
"The company is not able to mine coal from the Chhatti Bariatu South mine in Jharkhand as there have been instances of illegal quarrying by the local populations at the mine," said an official source.
NTPC is also operating three more coal mines in the state -- Chhatti Bariatu, Pakri-Barwadih and Kerandhari that are in the vicinity.
"The company is also unable to work at the other three mines as they are close by and unlawful mining at one has an impacted the others as well," said the source.
Some villagers locally are involved in the illicit mining, sources said citing some reports, and adding that they are selling the coal in the open market.
Besides this issue, NTPC has brought to the attention of the Jharkhand government that illegal mining has been also taking place at its other mines including Pakri-Barwadih Coal Block, sources said.
The company informed the state government last year that thousands of villagers gathered at Arhara village under Barkagaon block, in Pakri-Barwadih Coal Block area of NTPC and extracted coal.
Meanwhile, the Coal Ministry last week issued a show-cause notice to NTPC for delay in production from Chatti Bariatu South coal block and sought explanation from the power PSU for making slow progress in another mine in the state.
Chatti-Bariatu, Kerandari and Chatti-Bariatu (South) coal blocks were re-allotted to the company in January last year. They were forfeited because of long delays in developing them.
The company ventured into coal mining business with an aim to meet about 20 per cent of its coal requirement from the captive mines by 2017.
It has so far been allotted 7 coal blocks, including 2 that are to be developed through the joint venture route.