214 Illegal Coal Block Allocations Cancelled by Supreme Court

The Supreme Court today cancelled 214 of 218 coal block allocations it declared illegal in August, in a verdict that has major implications on the energy sector.

Only four blocks linked to big power projects have been spared.

All private firms allotted coal blocks by various governments between 1993 and 2011 have lost their mining rights. The government is now free to auction or allot the blocks to central firms.

46 companies who had started operating have been given six months’ breathing time to wind up. But they have to pay a fine of Rs. 295 for every tonne of coal mined, which, some estimates say, could amount to a total of 8,000 to 10,000 crores.

Metal stocks fell sharply after the Supreme Court verdict. Sensex also fell over 200 points but recovered later.

On August 25, the court had said coal blocks were allotted through an “ad-hoc and casual” approach “without application of mind”. It said, “Common good and public interest suffered heavily in the unfair distribution of the national wealth – coal – which is king and paramount Lord of industry.”

The court’s decision stems from 2012 allegations by the national auditor that the government underpriced coal mines and gave away as much as $33 billion or Rs. 1.86 crores in windfall gains to companies in the scandal that has come to be known as “coal-gate”.

Coal miners and power producers had argued that a huge investment was at stake and the cancelling of allotments should be taken up case by case.

The government had earlier told the court that it wanted the process of “reallocation of the blocks to start as soon as possible”.

India is suffering from critically low coal supplies which it needs to fuel power plants. Blackouts are common in the country of 1.2 billion people.