Sunday, Oct 26, 2014

All coal allocations since 1993 illegal, says Supreme Court

Supreme Court on Monday declared all coal mines allocated since 1993 illegal. (Reuters) Supreme Court on Monday declared all coal mines allocated since 1993 illegal. (Reuters)
New Delhi | Posted: August 26, 2014 4:40 am | Updated: August 26, 2014 10:56 am

In a move that could either derail large investments in steel and power or help clean up the process of allocation of natural resources, the Supreme Court on Monday declared as illegal all coal mines allocated since 1993, including those allocated to central and state PSUs.

While the allotments have been declared illegal, unlike in the 2G spectrum case, the allotments have not been cancelled; a decision on this will be taken next week, possibly even on a case-by-case basis. The bench was headed by Chief Justice of India RM Lodha.

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Stocks of several steel companies tanked as industry estimates peg the investments riding on these captive mine allocations at anywhere between R80,000 crore and R1 lakh crore. Interestingly, while the CBI said it was going to close the case involving the Aditya Birla Group due to lack of evidence of criminality,

the SC declared the allotment illegal.

Former coal secretary PC Parakh said en masse cancellation of licences would be disastrous for the economy, and the Supreme Court would probably come up with a mechanism to deal with de-allocation of coal blocks. While coal and power minister Piyush Goyal said he was happy the Supreme Court had announced part of the judgment in the coal sector and that clarity in law and policy was good for investors and the sector, finance minister Arun Jaitley said the government may appeal to the Supreme Court to hasten the process of re-allocation.

With the Supreme Court declaring all coal mines allocated since 1993 illegal, the policy on most major minerals is now in a limbo. While the government will have to come out with a policy to re-allocate mines whose licenses are cancelled, and one for new mines, iron ore production has fallen from 218 million tonnes to in FY10 to 135 million tonnes in each of the last two financial years, a result of en masse cancellation of licences in states like Odisha, Goa and Karnataka. While captive iron ore mines of firms like SAIL and Tata Steel are now on their way to getting regularised, the Odisha government has levied fines of R58,000 crore on them.

The SC bench observed that “there was no objective criteria, nay, no criteria for evaluation of comparative merits. The approach had been ad hoc and casual. There was no fair and transparent procedure, all resulting in unfair distribution of the national wealth. Common good and public interest have, thus, suffered heavily. Hence, the allocation of coal blocks based on the recommendations made in all the 36 meetings of the screening committee is illegal.” It observed that the allocation of blocks through government dispensation route, however laudable the object may be, also is illegal since it is impermissible as per the Coal Mines Nationalisation Act.

The court’s order exempted 12 continued…

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