The Supreme Court in a judgment on Monday while discussing a PIL on coal block allocation in the country said that all coal block allocations in the country since 1993 were illegal. It slammed the Screening Committee for suffering from “the vice of arbitrariness and legal flaws.” It said the committee has been neither consistent nor transparent. The Court continued, “there is no proper application of mind, it has acted on no material in many cases, relevant factors have seldom been its guiding factors, there was no transparency and guidelines have seldom guided it. On many occasions, guidelines have been honoured more in their breach.”
But there is an overpowering focus on the allocation of the coal blocks while much of what the Supreme Court says has a lot to do with how the private players have used the coal they were allocated.
The Coal Mines Nationalisation Act, 193 makes some clear indications on who can carry out coal mining in India. It is clearly stated, referred to by the Supreme Court order as well, that mining can be carried out only for “production of iron and steel and generation of power, washing of coal obtained from mine or production of cement.”
As a result, commercial mining by the State Public Sector Undertakings/companies is not permitted. But as the Court points out, “as many as 38 coal blocks were allocated to State Public Sector Undertakings for commercial mining though these undertakings were not engaged in any specified end-use activity. They submit that allocation of coal blocks made by the Central Government, whether by way of the Screening Committee route or dispensation route, is ipso facto illegal and it is in total violation of the CMN Act.” Any mining which is not used to generate separate end products and are just sold commercially is therefore not allowed.
With specific regard to the ultra mega power projects (UMPP), the Court said that the benefit of the coal block is passed on to the customers by keeping power tariffs low. However, in a few cases, the Government has allowed diversion of coal from UMPP to commercial exploitation. “Having regard to this, it is directed that the coal blocks allocated for UMPP would only be used for UMPP and no diversion of coal for commercial exploitation would be permitted.”
Take the example of the ongoing case between Reliance Power and Tata Power. Tata Power has challenged the government's decision of allowing Reliance Power to use coals given to it for Sasan UMPP to other projects of its own. While the court is yet to give its judgment, Reliance Power is not challenging the fact that it is using excess coal for other purposes. Sasan Power Ltd, a subsidiary of Reliance Power, said in a hearing that all bidders of the project including Tata Power knew that there was excess coal, according to media reports. It says that the conditions of the allocation said that the additional coal “could be sold, transferred, utilised for other work subject to government's permission."
Analysts also agree that the profitability of many power companies will go down if they cannot use the captive mines for projects other than the UMPPs. And while the implications of calling all allocations since 1993 are huge and complicated, here is a part of running an UMPP which can be rectified immediately. There is no reason why coals from captive mining could just be sold off by private players to increase its own profitability. It is a natural resource that belongs to the country and cannot be distributed among private layers for just their own benefits.
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