The Supreme Court on Wednesday cancelled the allocation of 214 out of 218 coal blocks allotted by the successive Central Government since 1993. The cancellation would come into effect from March 31, 2015.
Of those four mines which have been spared, three were operational — one belonged to the Steel Authority of India and two to Sasan Power limited’s ultra mega power projects. The fourth mine allotted to National Thermal Power Corporation (NTPC) is yet to be operational.
With the Government assuring the court that it was prepared to meet all consequences even if all 218 coal blocks had to go, the Bench headed by Chief Justice RM lodha felt there was no need to save all but four ongoing projects. These included 172 coal blocks where no work had yet started. “There is no reason to save them from cancellation. The allocations are illegal and arbitrary, the allottees have not yet entered into any mining lease and they have not yet commenced production (of coal),” said the bench, also comprising Justices Madan B lokur and Kurian Joseph.
The Centre had sought an exemption for 46 blocks of which 40 were operational and six were “ready” to operate. Of them, the Bench decided to save NTPC coal mine allotted at Pakri Barwadih and SAIl’s coal block at Tasra, which besides being public sector undertakings were not joint venture projects. The two blocks allotted to Sasan Power at Moher and Moher Amroli Extension too survived as they were ultra mega power plants which already stood excluded from disqualification by the court’s earlier order. The remaining 42 blocks stood quashed as being “illegal and arbitrary”.
While giving six months to the plants already operational to shut down operations, the Bench imposed a hefty cost of Rs295 per metric tonne of coal extracted by these companies since they began business. This was an additional levy to be paid on or before December 31, 2014 by the 36 companies asked to close by March 2015. The four spared blocks too will have to pay fine. The figure of Rs295/mT was based on an assessment by CAG which had estimated it as the loss incurred by the Centre on account of wrongful allocation.
The affected companies jointly represented in the court by three mining associations had prayed for exemption from cancellation as they claimed to be 92 to 95 per cent ready to operate. They argued that closure of coal mines would result in an estimated loss of Rs4.4 lakh crores in terms of royalty,cess, direct and indirect taxes to the exchequer.
Most companies which got permission for operation had made an investment of about Rs2.87 lakh crore in 157 coal blocks as on December 2012. loans to the extent of about Rs2.5 lakh crore had been lend by banks and financial institutions of which State Bank of India alone accounted for Rs78,263 crore, which is almost 7.9 per cent of its net worth for the previous financial year.
But the Bench held, “Whether they are 95 per cent ready, 92 per cent or 90 per cent ready for production is wholly irrelevant. Their allocation was illegal and arbitrary, as already held, and therefore we quash all these allotments.”