Post ‘93 coal allocations illegal: SC

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On Sept 1, blocks awarded up to 2010 may be cancelled or penalty imposed

Post ‘93 coal allocations illegal: SC
The Supreme Court on Monday declared as 'illegal' all coal blocks allocated from 1993 to 2010. If the court decides to cancel them, it would have 'ser­ious' ramifications for the economy, said former coal secretary P C Parakh.

A three-member Sup­reme Court bench headed by Chief Justice R M Lodha, which examined the coal allocation, held the allocations as unfair distribution of national wealth. The bench also comprised justices Madan B Lokur and Kurian Joseph.

The government's award of around 200 coal blocks to steel, cement and power companies has come under the scanner after a 2012 CAG report, which had said that underpriced sales had led to a presumptive loss of Rs 1.86 lakh crore to the exchequer.

The Supreme Court, while allowing the coal block allocations to ultra mega power projects to continue, barred them from using the coal for any purpose other than captive consumption.

The apex court said it will hold a further hearing on September 1, after which it will decide whether to cancel the allocations or impose some sort of penalty.

"As we have already found that the allocations made, both under the screening committee route and the government dispensation route, are arbitrary and illegal, what should be the consequences, is the issue which remains to be tackled. We are of the view that, to this limited extent, the matter requires further hearing," the bench said in its 163-page judgement.

Two-thirds of India’s nearly 2 lakh mw power generation comes from thermal plants, that are largely dependent on 565 million tonnes of coal produced in the country. Some coal is imported as well. India is the third largest importer of coal in the world.

Parakh told a business channel that "a coal mine takes in our country anywhere between eight to 10 years to start operations. We are already in serious shortage of coal in the country.”

After the pronouncement, the bench orally said though the attorney general had given the figures of coal blocks, they were not verified and even the state governments had raised objections.

These issues have to be gone into, the court said while suggesting that a small committee comprising retired Supreme Court judges can be set up to give its report on the issue in the shortest possible time.

Power and coal minister Piyush Goyal told reporters, “I would look forward to finality in the matter of coal block allocations which have for several years now kept the sector in limbo. With the finality that one can expect very soon, I hope the sector can start progressing.”

Later, prime minister Narendra Modi had a meeting with Goyal and finance minister Arun Jaitley to discuss bottlenecks in the power sector and also deliberated on the fallout of the apex court’s view on coal block allocation.

Parakh, who headed one screening committee as coal secretary, said he had earlier flagged the issue with the suggestion of an amendment to the coal mine nationalisation act to bring in a fair and transparent bidding process.

In July 1992, the coal ministry had ordered setting up of a screening committee to consider proposals from private power companies for captive mining on first-cum-first-serve basis.

Screening committee guidelines give preference to large projects of power and steel companies. In all, 216 blocks were allocated between 1993 and 2010, out of which 24 were taken away at different points in time, leaving 194 allocated blocks.

“If these coal blocks are cancelled, we will be at least five years behind in terms of production of coal, which can have serious implications for our power sector,” Parakh said.

The UPA government came under the scanner and was accused of crony capitalism by then opposition parties including BJP after the 2G scam involving a presumptive loss of Rs 1.76 lakh crore in spectrum allocations, followed by another scam by CAG on coal allocations.

Earlier in the day, the central bureau of investigation said that it was likely to close a coal scam case against industrialist Kumar Mangalam Birla and Parakh that surfaced after the 2012 CAG report on coal scam.

The CBI filed the case against Birla and Parakh late last year in relation to a block allocated in 2005 to Hindalco Industries, which is part of the $40 billion Aditya Birla Group.

A senior official of the Adity Birla Group told Financial Chronicle, the next step is for the government to prepare a plan of action and get it approved by the Supreme Court.

“The re-auction of the mines can be one option available with the government but that is not the only option. Globally, the government develops the infrastructure and provides it for mining, while in India all the work from buying to developing the infrastructure has to be done by the company. All these are hurdles in the growth of the new mines,” the official said.

Jindal Steel and Power, which is operating two coal mines in Chattisgarh among eight allocated between 1993 and 2010, on Monday said it is “evaluating the Supreme Court judgement” on coal block allocation and “the implications for JSPL”. It’s share price slumped 13.97 per cent to settle at Rs 253.15.

“We are not in a position to comment as we are currently evaluating the Supreme Court judgement and the implications for JSPL,” the company said.

Dhananjay Sinha, head of institutional research at Emkay Global said, “We believe Supreme Court’s verdict is a landmark judgment for the mining sector, as it will act as a benchmark for other pending and future cases relating to illegal mining.”

“It is our view that location relevance of mines and power plants (or users) would make it imperative to reallocate the mines to the same power plant owners or users. While the committee will undertake a case-by-case approach in disposing the illegal mine cases, it is likely that majority of the cases will be dealt with by imposing penalty,” said Sinha.

“We see low chance of blanket de-allocation, which can have disastrous consequences for the users, in our view,” Sinha added.

(With inputs from Amit Mudgill from Delhi and Vikas Srivastav from Mumbai)


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