Commercial mining should be permitted: P C Parakh

Interview with Former coal secretary

On a day the Supreme Court cancelled coal block allocations done through the screening committee and government dispensation routes, P C Parakh, former coal secretary and author of Crusader or Conspirator? Coalgate and other Truths, spoke to Jyoti Mukul on the need to ensure minimum dislocation for industry. Edited excerpts:

With deallocation of coal blocks, what course should the government take?

Giving blocks to Coal India would only be a temporary thing. The Supreme Court decision leaves the government with no alternative but to give out blocks through auctioning. The law has already been amended to permit bidding.

How far is the order justified in saying the state governments cannot mine coal?

The order says that under the Coal Mining Nationalisation Act, only the Centre and its entities can mine coal but my view is different. Blocks can be given out to state governments for mining. The Mines and Minerals (Development & Regulation) Act, however, does not empower the Central government to make allocations.

With annulling of allocations, hasn't the court caused a setback to industry, whose end-use projects were linked to the coal blocks?

To prevent immediate dislocation of power plants and other industry, the court has given six months and has not immediately deallocated producing blocks.

Won't the imposition of penalty increase the cost of production?

Even with Rs 250 a tonne penalty, the cost of coal would be less than what these plants would have purchased from Coal India. There is some problem with the quantification of penalty because the cost of production is not the same for everyone. Uniform penalty is slightly irrational. Maybe the government would have to look at a differentiated penalty.

What should be the policy direction?

This is an opportunity for the government to restart. The Coal Mining Nationalisation Act should be amended to permit commercial mining, so that good companies come into the sector. There should be opening up of the sector, just as it happened in aviation and telecommunication. Some half-a-dozen companies can efficiently produce 50-100 million tonnes required by the industry. It is up to the government to take a decision on this before it starts auctioning.

The auctioning done so far has not received good response. Do you think with a large number of blocks now available, there will be enough interest?

I understand the blocks put up for bidding so far were not good and, therefore, the response was poor. But once more blocks are auctioned, there would be substantial competition. More number of players, who have plants based on imported coal, would take part.

What would companies impacted by deallocation do?

Except in cases where there is a CBI investigation or a fraud has been detected, companies having mining rights that have been cancelled should be given the first right of refusal. They should be allowed to retain blocks if they match the winning bid price. This will ensure minimum litigation and solve the problem of right over land.