SC scraps 214 coal blocks allocation, slaps huge fine

The Supreme Court today scrapped the allocation of 214 out of 218 coal blocks to various companies since 1993 terming it as "fatally flawed", an order that could have serious implications for the energy sector and a pay out of Rs.7,900 crore as fine by affected corporates.
Allowing the Centre to take over operation of 42 cancelled blocks which are functional, the apex court gave a six month breather to the remaining blocks to wind up their operations.
The apex court said the beneficiaries of the illegal process "must suffer" the consequences and refused to show sympathy to private companies which submitted that Rs 2.87 lakh crores have been invested in 157 coal blocks and Rs 4 lakh crores in end-use plants.

Today's order covering allocations made by various governments including Congress, NDA and UPA between 1993 and 2010 will pave the way for the Centre to put the remaining 172 blocks for auction.
A bench headed by Chief Justice R M Lodha said that its judgement is intended to correct the wrong done by the Centre over the years and to send a message to Government not to deal with the natural resources as if they belong to a few individuals who can fritter them away at their sweet will.
It, however, saved from the "guillotine" four allocations one each to SAIL and NTPC and two blocks to Sasan Power Ltd owned by Anil Ambani's Reliance Power and also gave a six months breathing time to rest of them to wind up their operations by March 31, 2015.

The bench, also comprising justices Madan B Lokur and Kurian Joseph, directed the the allottees of coal blocks to pay within three months an additional levy of Rs 295 per metric ton of coal extracted to compensate financial loss caused to the exchequer by the illegal and arbitrary allotments.

While the Government described the verdict as being in accordance with its stand, India Inc feels it could cause serious supply disruptions and accentuate the power crisis and jeopardise investments in the sector.
"The decision taken by the Supreme Court to cancel all but four coal blocks is likely to adversely impact the domestic coal supplies in the country and will erode investor confidence," CII President Ajay Shriram said.

A preliminary analysis by power sector experts has estimated a pay out of over Rs.7,900 crores by way of fines imposed on the corporates that would also stand to lose their allocation.