Apex court scraps 214 of 218 coal blocks allotted since 1993

In a major blow to companies involved in coal mining, the Supreme Court on Wednesday ordered the cancellation of 214 of the 218 coal blocks that were allocated between 1993 and 2011. It also imposed a penalty of ₹295 per tonne on the coal illegally extracted by 42 companies which had commenced production.

The verdict evoked strong reactions from the corporate sector. Most companies hoped the Government would have a Plan B that would, among other things, make clear on what happens to the investments already made.

A three-judge Bench comprising Chief Justice RM Lodha and Justices Madan Lokur and Kurian Joseph rejected the argument made on behalf of the coal companies that the cancellation of the blocks would have a huge impact on the economy.

“The allocations are illegal and arbitrary,” the Bench said.

Rejects arguments The court rejected the argument that as many of the allottees had not yet entered into any mining lease or commenced production their allocations should not be cancelled. “Whether they are 95 per cent ready or 92 per cent ready or 90 per cent ready for production is wholly irrelevant as the allotment to them is illegal,” the court said.

Cancellation period Four blocks that were spared are: Moher and Moher Amroli Extension of Sasan Power (ultra mega power project); Tasra allotted to SAIL; and Pakri Barwadih to NTPC.

The order said though the allotment of 42 of 46 coal blocks were quashed, the cancellation would take effect only after six months, with effect from March 31, 2015.

The Bench said: “This period of six months is being given since the learned Attorney-General Mukul Rohatgi submitted that the Central Government and Coal India Ltd would need some time to adjust to the changed situation and move forward. This period will also give adequate time to the coal block allottees to adjust and manage their affairs.

“That the CIL is inefficient and incapable of accepting the challenge is not an issue at all. The Central Government is confident, as submitted by the Attorney-General, that the CIL can fill the void and take things forward,” the court observed.

According to the court, the estimated loss is ₹295 per tonne of coal and the compensatory payment on this basis should be made by the companies which had commenced extraction within three months and, in any case, on or before December 31, 2014.

The coal extracted hereafter till March 31, 2015, will also attract the additional levy of ₹295/tonne.

The Government is expected to mop up ₹8,000-10,000 crore through this compensatory payment.

Acting on two public interest writ petitions, the court on August 25 held that the allotment of coal blocks made by the Screening Committee of the Government, as also those made through the Government dispensation route, were arbitrary and illegal.

On Wednesday, after hearing the views of various stakeholders, the Bench cancelled 214 of the 218 allocations made.

The four that got away

Blocks allocated to Anil Ambani-run Reliance Power’s 3,950 MW Sasan Ultra Mega Power Project — Moher and Moher Amroli Extension — and one each belonging to Steel Authority of India (Tasra) and NTPC’s (Pakri Barwadih) were spared the de-allocation. The reason for exempting Reliance’s two coal blocks was that the Sasan project was awarded to Reliance Power through a tariff-based international competitive bidding process. There was, thus, an implicit auctioning of these blocks from which the company was to mine coal. Hence, the court decided not to “disturb” their allocation.

The blocks awarded to NTPC and SAIL were not de-allocated because both are Central public sector undertakings eligible to mine under the Coal Mining Nationalisation Act.

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