Now, Centre must begin auction process soon
The Supreme Court's September 24 decision to cancel 214 of the 218 coal blocks allotted since1993 ends the uncertainty that had surrounded the issue. It also paves way for the Union Government to proceed with transparency and clear-headedness to mine the natural resource critical to our growing energy needs. For several months now, since the apex court began hearing the case of “illegal and arbitrary” allotment of coal blocks to various private players after the Comptroller and Auditor-General raised the red flag, there had been a virtual standstill in coal mining, and this had hit the coal-based power plants in a big way. Some of these plants faced critical shortages, having stocks to barely last a few weeks. The Supreme Court’s decision does not mean that suddenly coal would be available in plenty; in all probability, the Government will have to import it to meet the immediate and short-term needs. But the court’s order ensures that henceforth, because the allocation of coal blocks will be done in a correct manner, the process will not run into legal hurdles and impact the economy. The Centre must seize the occasion to put in place a fool-proof mechanism that does away with arbitrariness and perceptions of deceit. Given that the Government had made it clear before the verdict was out that it was prepared for a scenario where all the allocations would be cancelled, it can be expected that the Government has a plan in place to deal with the situation. It must promptly put in place a policy that takes care of both the country's needs for quick and effective remedy to the coal shortage and a transparent method to mine the natural resource. Since the role of public sector Coal India limited is going to be crucial, it is to be hoped that the functioning of CIl will be overhauled to make it more professional.
One other positive outcome of the court's verdict, besides the promotion of transparency, is that the Government will have a windfall gain of close to Rs10,000 crore: The court has ordered firms that had commenced mining to cough up Rs295 as compensation for every metric tonne of coal they have “illegally” extracted. The Government is now free to auction the 214 cancelled blocks. The methodology of these auctions can be worked out in a way that the private parties which have lost the blocks get the first right of refusal. The four blocks that escaped the axe are among the 46 that the Government had earlier requested the court to spare because they had been mining coal. While the court did not entertain the plea, it has given the 42 affected ones permission to continue mining until March 31, 2015, provided they paid the additional levy.
The verdict has predictably set off a political fight with parties trying to score points over one another, but this is not the time to engage in petty quibbling. The country faces a challenge in the energy sector and the need of the hour is to move forward. It is true that privates firms which have lost out will have to face financial hurdles, and the banks which loaned them money in the venture too stare at the possibility of low or even zero recovery in the short to medium term. One supposes this is the price to be paid for adopting processes which are not just, and are illegal and arbitrary, even if not mala fide.