The Supreme Court order terming coal block allocations since 1993 "illegal" has raised the spectre of cancellation over the natural resource-linked sector. This comes about two and a half years after the apex court had issued its judgment on the 2G telecom spectrum allocation case, scrapping the licences.
Unlike spectrum deallocation, in which telecommunication companies could bank on other spectrum bands, companies with coal blocks do not have any fall-back blocks but would have to depend on imports. A host of companies, including big ones such as Hindalco, Tata Power, Bhushan Steel, Essar Power, Reliance Power, Lanco, GVK and Arcelor Mittal, operating across five sectors---pig iron, power, coal to liquid, cement and steel---face the risk of deallocation of coal blocks and consequent uncertainty regarding projects linked to those.
Another order from the court, expected on September 1, will remove uncertainty regarding the matter. "The SC has not resorted to wholesale cancellation, just like they did in the 2G case, otherwise there will be a serious problem of coal supply. It has taken a practical view," said PC Parakh, former coal secretary.
Under the Coal Mining Nationalisation Act, coal blocks were allocated to specified sectors mentioned earlier, for captive use. The allocation was through the screening committee route---representatives of various ministries went through the applications, which had recommendations from state governments. A senior Cabinet minister said the order would give an end to arbitrary allocations and all natural resources would have to be auctioned. "In India it is always better to use nondiscretionary methods for allocation of natural resources. Now it's important to decide whether to confirm these allotments or cancel them. But, if you don't decide which way we have to go, then do we want all our lives to import coal?"
Officials who were part of the screening committee said the panel's task was to sift through applications to examine the capability and requirements of companies. P C Parakh, the former coal secretary who had faced a Central Bureau of Investigation probe for the allocation to Hindalco but got a clean chit, had earlier said, "The screening committee makes recommendations for allocation of coal block, but its recommendations are not always mandatory for reasons to be recorded in writing. The government can deviate from the screening committee recommendations, whether it is the secretary or the minister...The screening committee is not a decision-making body. The decision is always with the minister."
Former prime minister Manmohan Singh was in direct charge of the Union coal ministry, as a Cabinet minister for this portfolio, during a large part of the United Progressive Alliance government's 10-year tenure.
Parakh had also alleged the screening committee was experiencing various pulls and pressures during the decision-making process. As such, he had favoured a competitive bidding route. During this period, Jharkhand Mukti Morcha leader Shibu Soren was Union coal minister.
The two petitions on the basis of which Monday's order was announced had been filed after studying a March 2012 report of the Comptroller and Auditor General. The report said delay in introducing the competitive bidding process had rendered the existing process beneficial to private companies. It assumed a Rs 1.86-lakh-crore gain to private coal companies on an average cost of production and the average selling price of Coal India's opencast mines in 2010-11.
"A part of this financial gain could have accrued to the national exchequer by operationalising the decision taken a year earlier to introduce competitive bidding for allocation of coal blocks," said the report.
