Supreme Court terms coal block allocation since 1993 as illegal; says no commercial exploitation for captive mines

The Supreme Court (SC), on Monday, has held the coal block allocation as illegal in the case pertaining to the coal scam.

It has categorically said that the coal block allocations from 1993 suffer from "arbitrariness" and were "illegal." It disallowed any exploitation of captive mines by ultra mega power plants (UMPP) and has said that commercial usage of captive mines cannot be allowed.

It said that the government did not adhere to proper guidelines and no objective criteria were being followed either.

However it has not deallocated coal blocks yet and said that would require further hearing to see if it needed to deallocate 218 coal blocks. Supreme Court will decide the consequences of the "illegality" on September 1.

Following the SC statement, the BSE Metals index plunged 250 points. Also in reaction to the news, Jindal Steel and Power fell 5.6%, Reliance Power is down 2%, Tata Steel is down 1.6%, while Hindalco is down 6%. 

However, unless the September 1 decision comes, it will not be possible to understand the actual impact on several companies. The sectors that will take the major hit are steel, power and coal.