Coalgate: SC reserves judgment on “illegal” coal blocks

The Supreme Court today deferred a decision on cancelling the award of 218 coal blocks it had previously ruled illegal, after the court ended hearing in the case. Chief Justice Rajendra Mal Lodha reserved the judgment to a later date, which he did not specify.

The Supreme Court had earlier declared the award of 218 coal blocks "illegal and arbitrary'', and the government has now left a decision on the fate of these blocks to the discretion of the apex court.

In an affidavit filed by the ministry of coal on 1 September, attorney general Mukul Rohtagi had stated that the centre has "no objection" to the cancellation of coal block allocations declared ''illegal'' by the apex court and was also not insisting on any particular course of action.

Any annulment of the grant of coal mining concessions would put investments worth crores of rupees at risk and threaten a worsening of the power shortage.

The blocks include about 40 that are producing coal and another six that are ready for production, together having a capacity to produce 50 million tonnes of coal in a year - about 9 per cent of the 566 million tonnes the country produced last year.

Even for the 46 functional blocks the centre wanted to be protected, the affidavit stated that an additional levy at the rate of Rs295 per tonne as suggested by the Comptroller and Auditor General (CAG) could be levied.

The government also stated that "retention" of the 40 productive blocks and six ready to become operational may be considered by the court provided an additional levy at the rate of Rs295 per tonne as suggested by Comptroller and Auditor General (CAG) is imposed.

As per the information placed before the court by the coal ministry on mining lease, commencement of production and linked end-use investment, of the 40 functional mines two are allocated to an Ultra Mega Power Project (UMPP), which has not been declared  illegal by the 25 August judgement (See: Goyal welcomes SC ruling declaring all coal allocations illegal).

Further, the affidavit said the six coal blocks which are likely to come under production were determined by the Coal Controller's Organization (CCO), as they have received mine opening permission under Rule 9 of the Colliery Control Rules, 2004 (framed under MMDR ACT, 1957), which is the final step towards opening of the mines.

The ministry, which gave details of information of 15 lignite blocks received from the allottees, also stated some of the hurdles it was facing as a result of the apex court judgement and sought suitable directions.

It sought directions as to the title of the allocated coal blocks now being held illegal - that on re-allocation those previous allottees be directed to "re-convey" the land to central government.

"Upon cancellation of the coal block, the title of the land would still remain with the allottee. In the event of subsequent grant of the coal block, it may not be possible for the grantee to obtain title of the land from the earlier owner," it said.

"It is, therefore, suggested in such cases the allottees be directed to re-convey the land to the central government or to its nominees etc upon payment of the purchase price of the land," the affidavit further said.

The ministry stated that in view of the judgement holding as illegal the allocation made from 1993 to 2010, "this court may make it clear that the mining leases executed subsequent to the coal allocation would also be deemed to be void and of no legal effect."

The affidavit also raised the issue of large number of bank guarantees which are currently alive and furnished by the allottees to the centre or to any of its instrumentality and sought future course of action in view of the blocks being declared as illegal.

The ministry also sought to declare as infructuous all the petitions filed in different High Courts on the issue in view of the judgement of the apex court, which was also informed that 80 Coal blocks have been de-allocated by the Centre through Inter Ministerial Group (IMG) / Intra Ministerial Review Committee.

The centre in its affidavit also put on record the statement made by Attorney General that "the Union of India was not in favour of constitution of any committee to look into the consequences of the judgement, i.e, declaration of allocation as illegal in the interest of bringing finality to the issue at the earliest."

It also said that the Attorney General highlighted the power crisis in the country and had stated that "Union of India would like the process of re-allocation of the cancelled blocks to start as soon as possible in a transparent manner."

A decision to cancel the blocks would hit firms including Jindal Steel and Power Ltd, Hindalco Industries Ltd and Sesa Sterlite Ltd, which have spent heavily on steel and power plants based around the coal blocks.

India is suffering from an acute shortage of coal, which fuels about three-fifths of its power needs, and has had to turn to costly imports to meet rapidly growing demand.