Coal Blocked

In one fell swoop, the Supreme Court cancelled all but four of the 218 coal block allocations made since 1993 exactly a month after it declared the allotment process as being “arbitrary and illegal”.
However, it allowed allottees who have commenced extraction of coal from the illegally allotted mines six months to make alternative ar rangements for coal linkage for their plants. It permitted the Centre and Coal India Ltd (CIL) to take back the coal bl ocks after March 31, 2015.
In what could be a windfall to the national exchequer, estimated at Rs.10,000 crore, the court also accepted the calculations of Comptroller and Auditor General (CAG) on loss suffered because of illegal allotment of coal blocks and said all those who have extracted coal from these mines would pay Rs 295 per tonne of coal to the government as additional levy. “The compensatory payment on this basis should be made within a period of three months and in any case before December 31, 2014. The coal extracted hereafter till March 31, 2015 will also attract the additional levy of Rs 295 per metric tonne,” the court said.
Following the order the government chose to stay silent about the future course of action on the projects that will be affected. There is considerable uncertainty among banks, including SBI, which have given loans to these projects. Stocks of several companies such as Jindal Steel and Power were down 10% as investors grew jittery .
In its ruling, the SC bench of Chief Justice R M Lodha, Justices Madan B Lokur and Kurian Joseph said, “The allocations are illegal and arbitrary; the allottees have not yet entered into any mining lease and they have not yet commenced production.Whether they are 95% ready or 92% ready or 90% ready for production is wholly irrelevant. Their allocation was illegal and arbitrary , as already held, and therefore we quash all these allotments.“
The bench said the decision on the fate of the coal blocks was made easier by the NDA government's unequivocal stand that cancellation of the coal blocks was a logical consequence that should follow after the court found the allotment process to be “arbitrary and illegal“.
AG Mukul Rohatgi had argued that though the government was ready for the consequences of cancellation of all coal block allotments since 1993, he had requested the court to examine saving 46 of them -40 of which were operational and six on the verge of starting operations. However, the bench did not accept the request. It did not cancel the allotment of Moher and Moher Amroli Extension coal blocks to Reliance ADAG's Sasan Ultra-Mega Power Project and Tasra and Pakri Barwadih blocks to central government PSUs Steel Authority of India and NTPC respectively .
However, the court agreed to give six months to operational plants to make alternative arrangement for coal linkages and said the cancellation would take effect from March 31, 2015.
The court gave time because the Centre said CIL would need some time to adjust to the changed scenario. “That CIL is inefficient and incapable of accepting the challenge is not an issue at all. The central government is confident, as submitted by the AG, that CIL can fill the void and take things forward,“ said the CJI, who authored the judgment for the bench just three days prior to his retirement.
Justifying the six-month breather to the allottees, the bench said, “The central government is keen to move ahead but some time would be required to manage the emerging situation. Similarly , breathing time is also required to be given to the allottees to manage their affairs on the cancellation of coal blocks.“
However, the CBI scrutiny for criminality in the cancelled allocations will continue. “It is made clear that the scrutiny by CBI in respect of the allotment of 12 coal blocks out of 46 identified by the attorney general (and for that matter against any other allottee) will continue and be taken to logical conclusion,“ the bench said.