Coal truths

The Supreme Court has declared the award of all the 206 coal blocks between 1993 and 2012, made through the Screening Committee route as well as directly by the Coal Ministry, “arbitrary and illegal”. But unlike its judgment quashing all 122 2G licences and spectrum allocations issued in 2008, the Court has stopped short of ordering a cancellation this time. It will hold a further hearing before taking a decision which could have enormous implications for the economy. To order a blanket cancellation would be an unwise decision, not the least because coal blocks are location-specific. If cancelled, there is no sense re-allocating a block to any entity other than the power plant or cement unit already mining the coal from it. The power producer has much more to lose from de-allocation of a coal block than a telecom firm stripped of its spectrum, which it can always re-bid for.

The Supreme Court is right that the award of coal blocks in the last two decades was not conducted in a fair and transparent manner. While it is nobody’s — including the Court’s — case that the blocks should have been allocated solely based on competitive bidding, the fact is that no consistent or uniform norms were applied in determining the merits of applicants. The Screening Committee set up by the Coal Ministry did not have any objective criteria to evaluate proposals for captive mining and did not invite applications through advertisements. To the extent a level playing field was denied to applicants, the system was discriminatory and open to favouritism.

But that said, the Court should refrain from an extreme position that equates wholesale cancellation with revoking an illegality. A pragmatic solution is to make distinctions between coal blocks. Those where no attempts have been made to mine coal surely deserve to be treated differently; even here, it is important to assess the reason for the delay and evaluate whether it was justified or not. That only 33 of the awarded blocks are under production is cause to determine how many non-serious applicants have been merely squatting on the mines. But the 33 blocks producing some 50 million tonnes of coal annually — almost a tenth of India’s output — deserve to be treated differently. The Court could consider imposing penalties — based on a transparent methodology for computing any super-profits accruing from privileged access to an underpriced natural resource. For the Centre, the latest ruling should be a trigger to formulate a clear policy for allocation of coal blocks. In the long run, this should be coupled with de-nationalisation of commercial coal mining and opening up the sector to global players who have the technology to extract more mineral at much less cost.

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