Ed­i­tor's note

Power Watch India - - EDITOR'S NOTE - Jayant D Kulka­rni

In a land­mark judg­ment the Supreme Court of In­dia on 25th Au­gust had ruled that the al­lo­ca­tions made, both un­der the Screen­ing Com­mit­tee route and the gov­ern­ment dis­pen­sa­tion route, were ar­bi­trary and il­le­gal. Ex­actly one month after that it can­celled all but four of the 218 coal blocks that were il­le­gally and ar­bi­trar­ily al­lo­cated. It has in a way en­dorsed CAG’s ar­gu­ment that the gov­ern­ment had the au­thor­ity to al­lo­cate coal blocks by a process of com­pet­i­tive bid­ding, but chose not to do so. Since th­ese al­lot­tees paid less than what they should have oth­er­wise, the CAG had es­ti­mated the “wind­fall gain” by th­ese com­pa­nies to be about Rs 1856 bil­lion at about Rs 295 per ton of coal. The Cen­tre had sought pro­tec­tion for 40 blocks which were op­er­a­tional and six were on the verge of start­ing op­er­a­tions. The 40 com­pa­nies that have started op­er­a­tions will now have to pay a fine of Rs 9,000 crore for about 300 mil­lion tons of coal in the next three months. The court granted the hold­ers of 46 blocks time till 31 March 2015 to wind up their busi­nesses. The Supreme Court said that th­ese al­lo­ca­tions were “fa­tally flawed” and the ben­e­fi­cia­ries must suf­fer the con­se­quences. The apex court ex­pected that the gov­ern­ment will not deal with the nat­u­ral re­sources that be­long to the coun­try as if they be­long to a few in­di­vid­u­als who can frit­ter them away at their sweet will and ex­pected that the ex­che­quer may be com­pen­sated for the loss caused to it.

While this judg­ment is in­tended to bring in trans­parency in al­lo­ca­tion, it may how­ever jeop­ar­dise in­vest­ments made in the sec­tor in the last two decades. The 20 year old is­sue is get­ting set­tled now when a lot of in­vest­ment has gone into th­ese blocks and in­dus­tries are de­pen­dent on the coal. The rul­ing would lead to a rise in bank non-per­form­ing as­sets (NPAs) as sev­eral com­pa­nies had taken loans worth about Rs 1 lakh crore to set up power plants and other fac­to­ries us­ing th­ese coal blocks. The lender banks have to now worry that the decision would re­sult in an in­crease in their NPAs.

The ben­e­fi­cia­ries of th­ese 214 blocks have in­vested crores on th­ese mines. The court has given the gov­ern­ment six months to de­cide on a new coal block al­lo­ca­tion pol­icy. Cur­rently, about 42 blocks are pro­duc­ing coal to the tune of 53 mil­lion tons and ac­count for 10 per cent of the to­tal coal sup­plied in the coun­try. The gov­ern­ment of­fi­cials will have to quickly auc­tion the blocks to en­sure smooth sup­plies. The ver­dict would cer­tainly lead to a more trans­par­ent sys­tem of al­lo­cat­ing nat­u­ral re­sources in fu­ture but is likely to ad­versely im­pact the do­mes­tic coal sup­plies in the coun­try to­day and may erode in­vestor con­fi­dence.

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