Day after Coalgate verdict: Four state power entities to shell out 35% of penalty

SC verdict hits private firms, too; Rs 295-a-tonne fine to fetch Centre Rs 7,600 crore

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The penalty of Rs 295 a tonne imposed by the Supreme Court on the holders of all 42 operational coal blocks will fetch the government a whopping Rs 7,674 crore. Of this, Rs 2,686 crore, or 35 per cent, will be paid by four state-owned power entities — Punjab State Electricity Board (Rs 1,464.50 crore), West Bengal State Electricity Board (Rs 802.50 crore), Karnataka Power Corporation (Rs 375 crore) and Rajasthan Rajya Vidyut  Utpadan  Nigam (Rs 44 crore).

Based on the available production figures for the blocks, Jindal Steel & Power will have to pay a penalty of Rs 2,950 crore and Hindalco Rs 472 crore. Monnet Ispat, Usha Martin, etc, will also have to pay penalties.

The court has said the penalties should be paid by December 31 this year.

Of these blocks’ cumulative coal capacity of 276 million tonnes (mt), long-term power purchase agreements had been signed for 147 mt, while the rest was to be sold for end use at the market price. About 28,000 Mw of power capacity will be affected due to the cancellation of coal block allocations. (INDUSTRY’S LOSS IS EXCHEQUER’S GAIN)

In a submission to the court, an association of coal mining companies and power producers had said their investment in end-use plants stood at about Rs 4 lakh crore.

The Supreme Court’s judgment on Wednesday said, “The figure of loss of revenue to the exchequer to the extent of Rs 295 a tonne of coal extracted is borrowed from a report of the CAG (Comptroller and Auditor General), which is contested by the government of India and is pending consideration before a parliamentary committee on public undertakings; the report suggested only a part of the financial gain could have accrued to the national exchequer.”

It added, “It may well be that the cost of extraction of coal from an underground mine has not been taken into consideration by the CAG, but in matters of this nature, it is difficult to arrive at any mathematically acceptable figure quantifying the loss sustained.” In suggesting a figure of Rs 295 a tonne, the Centre had considered the average price of coal, as stated by Coal India Ltd (CIL) for 2010-11 (Rs 1,028 a tonne), it said.

“The coal extracted from the blocks allotted are of an inferior quality and the sale price thereof is much lower than the average sale price of CIL; since CIL has economically viable mines compared to the mines allocated to the private sector, which lack infrastructure and have several other problems,” the court said.

"The coal extracted hereafter till March 31, 2015, will also attract an additional levy of Rs 295 a tonne," it added.