Supreme Court turns the heat on coal

The euphoria over the successful launch of Mangalyan faded away by Wednesday afternoon, when the Supreme Court cancelled 214 out of 218 coal blocks allotted over the years from 1993 to 2010.

The cancellation of coal blocks, whose allotments were already held illegal by the apex court, is a mighty blow to private companies, including Jindal Steel & Power Ltd, the largest beneficiary of the allotments, and aluminum producer Hindalco Industries Ltd, whose projects are fired by coal from their own mines.

The court spared four blocks — one each given to state-run NTPC Ltd and Steel Authority of India Ltd and two blocks awarded to a Reliance Power Ltd-owned 4,000 mega watt power plant saying it is an Ultra Mega Power Project (UMPP) and "that was allotted through competitive bidding".

"The allocations are illegal and arbitrary; the allottees have not yet entered into any mining lease and they have not yet commenced production. Whether they are 95% ready or 92% ready or 90% ready for production (as argued by some learned counsel) is wholly irrelevant. Their allocation was illegal and arbitrary, as already held, and therefore we quash all these allotments," a bench headed by chief justice RM Lodha said.

However, the Supreme Court has given a six month breather for the companies to wind up their operations. The apex court has also levied a fine of Rs295 per metric tonne of coal, which will amount to nearly Rs9,000 crore.

The companies can pay the money in the next three months. And in case of further production during the next six months, the companies will have to pay Rs295 per metric tonne as additional levy.

The NDA government has candidly accepted the verdict and has exhorted all involved to move on. The government is expected to bring in a new coal policy and auction all the coal blocks once again in the next six months to avoid any crisis to the already shaky country's economy. The government is fully prepared to face the socio-economic impact, the government added.

On August 25, the court had held all coal blocks allocated from 1993-2010 illegal saying the government's screening committee had flouted the guidelines and recommended for allocation on the basis of no merits and there was no transparency and had adopted pick and choose policy.

The court also turned down the Centre's submission to save 46 coal blocks (40 operational and six others, which are yet to start their operation).

About the six blocks yet to start their operations, the court observed "they do not stand on a different or better footing as far as the consequences are concerned. These allotments are also liable to be cancelled. The allocation of the Pakri Barwadih coal block (allotted to the NTPC), being a central government public sector undertaking not having any joint venture is not liable to be cancelled.

The bench accepted attorney general Mukul Rohtagi's submission that on the cancellation of the coal block allotments, Coal India Ltd (CIL) would require some breathing time to manage its affairs and the government is keen to move ahead but time would be required to manage the emerging situation and granted six months.

The CAG in 2012 had found that allocating the mines to companies without an auction may have cost the government huge loss at the time. The coal ministry had started allocating state mines to companies for their own use after realising monopoly miner Coal India Ltd was failing to keep pace with demand.