Supreme Court of India on 24 September 2104 cancelled allocation of 214 out of 218 coal blocks which were allocated to various companies since 1993. The four blocks which were not cancelled included one of NTPC and SAIL each and two of Ultra Mega Power Projects of Sasan Power Ltd owned by Anil Ambani's Reliance Power.
The bench that quashed almost all allocated coal blocks was headed by Chief Justice of India RM Lodha and comprised Justice Madan B Lokur and Justice Kurian Joseph.
Earlier on 25 August 2014, SC in its verdict had held that the coal blocks allocated by the screening committee from 1993 to 2010 by various regimes, before pre-auction era, was illegal and arbitrary.
The Main Highlights of the Judgement
• The SC bench granted a breather time of six months to companies who have started extracting coal from the mines and asked them to make alternative arrangements for coal linkages for their plants.
• These orders of cancellation of the allocated blocks will come into effect from 31 March 2015. Till then, the court asked Coal India Limited (CIL) to take over the operation of 42 blocks which are functional at present though government had pleaded for 46 blocks.
• The bench accepted the CAG’s calculation on loss incurred by the government due to illegal allotment of coal blocks and directed all those companies which have started mining these coal mines to pay compensation to the government at the rate of 295 rupees per tonne as additional levy.
• The compensatory payment should be made within a period of three months and in any case before 31 December 2014. The coal extracted thereafter till 31 March 2015 will also attract the additional levy of 295 rupees per tonne.
• It also ruled that CBI scrutiny for criminality in the cancelled allocations will continue.
The Supreme Court took the decision following the statement of Attorney General that the government favoured the cancellation of the blocks as it is fully prepared to face socio-economic impact of the cancellation of the coal blocks.
Analysis and Commentary
This judgment of the Supreme Court is similar to its decision of 2012, when it cancelled 122 telecom licences. The judgement is a blow to the firms who have invested heavily in these mines and also has sent jittery to the banks who have financed these companies. According to estimates, the industry seems to lose 4 lakh crore rupees of investment and the banks are poised to see their Non-performing Assets (NPAs) rise. The ruling is also expected to hit different sectors like power, steel and mining.
However, 7 companies especially Jindal Steel and Power (JSPL) owned by Naveen Jindal will be affected the most by the judgement. It is expected that these companies are stand to lose 20 million tonnes per year of output.
On the other hand, others like SBI Chairman Arundhati Bhattacharya opines that judgement will help economic growth as it ended the uncertainty over coal block allocations. Now it is high time that government comes forward with a quick plan of action so that coal supplies are not disturbed.
When: on 24 September 2104