Opinion Off with their blocks

By quashing the allocation of 214 of the 218 coal blocks that it had declared to be illegally allotted, the Supreme Court has favoured the blunt instrument over fine-grained judgement. By fining the allottees Rs 295 per tonne of coal, the court doubly punishes bona-fide players. In its August judgment, the SC had sharply criticised the government’s screening committee allocation process as arbitrary, casual and illegal — something that should deeply embarrass both the NDA and the UPA. But this was a process that companies seeking mines for captive use couldn’t opt out of. This is not to rule out the possibility of illegality on the part of some firms — the CBI’s investigation is still on. But tarring all allottees with the same brush raises questions of fairness.

This judgment could wreak even more havoc than the en masse 2G cancellations. By striking at two critical sectors — power and steel — the court could set off a domino effect. The government had presented a more nuanced course of action whereby the 40 operational blocks and the six that were ready to begin work soon could have been exempted from cancellation subject to the payment of a fine. Industry representatives had also thrown their weight behind a differentiated fine-based approach. But by choosing a blanket cancellation of all but four allocations made since 1993 instead — an action reminiscent of the ill-advised retrospective tax amendment, and the SC’s iron ore mining ban seen by some as the spark that set off last year’s CAD crisis — the court has jeopardised Rs 1 lakh crore of investment.

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The court has given allottees six months’ breathing space to relinquish their mines after which Coal India will take them over until they are auctioned — a terrible idea, since it is because of CIL’s incompetence that captive mines were given out in the first place. But there is a web of legal complications that also needs to be negotiated such as the issue of transferring land titles. To begin a course correction, the government must consider instituting a right of first refusal for allottees stripped of their mines on a future auction price.