SC calls coal permits since ’93 illegal, unfair

Stops short of scrapping allocations, next hearing on Sept 1

NEW DELHI: In a major blow to India’s steel, power and cement sectors, the Supreme Court on Monday declared all coal block allocations made by the government between 1993 and 2010 as illegal as they were done in an arbitrary, non-transparent manner that violated procedures and went against public interest.

A special bench headed by Chief Justice of India (CJI) RM Lodha, hearing a set of public interest litigations (PILs) filed by lawyer ML Sharma and NGO Common Cause, however, did not pass any order on whether these allocations should be cancelled, saying further hearings would be needed to determine the consequences of the illegal acts. It will take up the matter on September 1.

The government had allocated 218 coal blocks between 1993 and 2010. Of these, 24 were cancelled, leaving 194 blocks that will be affected by this order. Projects worth ` 2 lakh crore being run or planned by some of India’s leading companies including Vedanta, Essar, NTPC, Jindal Steel & Power and Hindalco will be impacted by this order.

And since these sectors drive the engine of economic growth, the verdict may slow down the government’s efforts to revive the economy, which has grown at sub-5% for two successive years, resulting in fewer jobs and lower increments for everyone.

The PILs filed in 2012 were based on a Comptroller and Auditor General’s report that said the exchequer suffered a loss of ` 1.86 lakh crore due to arbitrary allocations of coal blocks.

“The entire exercise of allocation through the screening committee route appears to suffer from the vice of arbitrariness… in determining who is to be selected or who is not to be selected. There is no evaluation of merit,” the bench said in its 163-page order, holding that the 36 screening committees that had made the allocations did so casually, “without application of mind”.

The six-member screening committees, headed by the additional secretary of the coal ministry, were constituted to grant captive mines to private power, steel and cement companies.

Explaining why the court did not determine the consequences of the illegal allocations, the CJI observed verbally: “The figures (on how many mines are operating) placed before us were not sufficient.” He suggested setting up a committee of retired SC judges to recommend the action needed.

The bench, also comprising justice MB Lokur and justice Kurian Joseph, clarified that its ruling and observations would have no influence on the ongoing criminal investigations by the CBI into the illegality of the allocations.

“No part of our order should be read as affecting the cases,” the CJI said. Regarding 12 of the 194 blocks allocated for ultra mega power projects, the court said the companies would not be allowed to divert any coal for any other commercial purpose or project.

Unlike in the 2G verdict, where the court had observed that competitive bidding was the best way to allocate scarce natural resources such as telecom spectrum, the court, in this case, said the Centre’s decision not to pursue competitive bidding in coal block allocations wasn’t arbitrary or unreasonable and so, didn’t warrant judicial interference.

“I respect the judgment of the Supreme Court. It is in the best interest of the country and has brought closure to a dispute that has been pending for many years and that is a big plus for the Indian economy,” coal and power minister Piyush Goyal said.

“I hope the work to start acting on the judgment and delivering coal to increase electricity generation in the country and reduce the imports can be expedited.”