#dnaEdit: Start from scratch

With the Supreme Court cancelling 214 of 218 coal block allocations, declared illegal and arbitrary in a judgment delivered in August, an opportunity for a bold overhaul of the coal sector beckons. The plea to save 46 allotments — 40 coal blocks which commenced mining and six near- operational ones — presented the court with tough choices. The plea was couched in warnings of coal shortage, spike in non-performing assets of banks, loss of investor confidence, and penalising businesses for the Centre’s failings. Having discovered illegality, the court ran the risk of condoning the illegality by sparing them, but the Centre offered an unexpected exit route. The Attorney-General informed the court that should the allotments be cancelled, the Centre was “fully prepared to take things forward” and that Coal India Limited would take over and continue the extraction of coal  from the 46 blocks. Moreover, the Attorney-General also pressed for imposing penal charges of Rs295/tonne for coal already mined and to be prospectively mined as recommended by the CAG’s report. The NDA government’s desire to distance itself from the controversial UPA-era decisions and worries over the Aam Aadmi Party raking up any indulgence towards the allottees was evident in the A-G’s tough stances.

Posturing aside, the court judgment offers the BJP a chance to begin on a clean slate. The widespread prevalence of crony capitalism, the absence of a robust regulatory mechanism and legislative lethargy are at the root of the Centre’s troubles. The Supreme Court slammed the allocation of coal blocks through the Screening Committee noting that it lacked transparency, consistency, application of mind, or any rational criteria for evaluation of merits. Rather mindlessly, the Centre also allotted coal blocks to nearly 100 state government PSU’s, though Section 3(3)(a) of the Coal Mines Nationalisation Act, 1973, has a bizarre provision explicitly restricting coal blocks only to Central government PSU’s. It is this provision which forced the Supreme Court’s hand in cancelling the state PSU allotments. The CNM Act made coal a central monopoly with Coal India Limited as the major player, guided by a misplaced zeal to drive out coal mafias and rationally exploit this precious natural resource. Though amendments in 1976 and 1993 allowed captive mining by private companies engaged in iron and steel, cement and power production, these have not been adequate to address shortages or the corruption.

The captive mining concept was legitimised by CIL’s failure to supply coal to steel and power plants in a timely manner forcing them to reduce capacity or source expensive imported coal. But diversion of cheap captive-mined coal to needy companies at a premium has been common. By granting captive mines to some steel, power and cement producers and leaving others in the lurch, the Screening Committee has distorted the market further. The mess is such that it is time for the archaic CNM Act to go and for the Centre to withdraw. While CIL’s monopoly will take many years to whittle down, it is imperative that bona fide companies with expertise in mining be allowed to enter the sector, unlike the undeserving companies that the Screening Committee allotted coal blocks to. This would rectify the illicit supply chain, undo CIL’s monopoly, and help bridge the coal shortage. Early this year, the UPA compounded the farce by constituting a weak Coal Regulatory Authority under the Coal Ministry even as the CRA Bill allowing an independent and statutory regulator lapsed in the Lok Sabha. The Supreme Court judgment is an indictment, and a deterrent, of such hypocritical measures that engender crony capitalism.