Coalgate verdict: Block re-auctioning to throw up challenges

Forcing a U-turn on the decentralisation of the coal sector, the Supreme Court decision is likely to reinstate the monopoly of Coal India Ltd (CIL).

In its decision, the apex court has directed CIL to take over all the cancelled blocks within six months and then look at re-auction after March 2015.

But given the dismal response to re-auctioning of deallocated blocks, the task of reallocating these is likely throw up challenges - legal, regulatory and financial.

The three deallocated blocks in Jharkhand - Andal Babuisol, Jhirki & Jhirki-West and Tokisud-II - were put up for bidding in February this year. Only two companies submitted bids for Andal Babuisol. The other two did not receive any response from the private sector.

"It is not easy to auction coal blocks. This can create new difficulties," said S Vijay Kumar, former secretary, Union ministry of mines.

The government was still contemplating placing the rest of the deallocated coal blocks under the hammer when the Supreme Court in August declared all allocations since 1993 as illegal.

Now that all the blocks, except the two allotted to NTPC and SAIL and four to UMPPs of Reliance Power, stand cancelled, the government is likely to make changes in the Coal Bearing Areas (Acquisition & Development) Act or bring in a new law similar to what was enacted at the time of nationalisation of coal mining in 1973.

In the contingency plan prepared for coal deallocation, the government was looking at new bidding norms for reallocating the blocks, said senior government officials.

In case of a new legislation, the government might opt for the ordinance route where the entire management along with assets would be taken over and handed to a custodian appointed by the government, that is CIL.

The apex court has also negated any apprehensions regarding the capability of CIL. "That CIL is inefficient and incapable of accepting the challenge, as submitted by learned counsel, is not an issue at all. The Central government is confident, as submitted by the learned Attorney-General, that CIL can fill the void and take things forward," said the Supreme Court in its judgment on cancellation of coal blocks.

Mineral-rich states and companies with operational coal blocks have raised apprehensions regarding reallocation. States such as Jharkhand, Odisha, Chhattisgarh and Madhya Pradesh have written to the Centre, stating reallocation of blocks would lead to escalation in the cost of mining and hence in the price of power.

Another issue the government will face is the acquisition of land titles and takeover of mining leases from the existing holders of captive mining rights.