Active Stocks
Tue Mar 19 2024 15:58:41
  1. Tata Consultancy Services share price
  2. 3,977.55 -4.03%
  1. Tata Steel share price
  2. 148.65 -0.64%
  1. Bharti Airtel share price
  2. 1,227.85 0.23%
  1. Power Grid Corporation Of India share price
  2. 258.95 -2.28%
  1. ITC share price
  2. 409.50 -1.89%
Business News/ Industry / Energy/  Govt moves to soften effect of Supreme Court order on coal blocks
BackBack

Govt moves to soften effect of Supreme Court order on coal blocks

The government proposes to the court to conditionally exempt 46 coal mines from deallocation

On 25 August, Supreme Court declared illegal all coal block allocations from 1993 to 2010. Photo: Noah Seelam/AFPPremium
On 25 August, Supreme Court declared illegal all coal block allocations from 1993 to 2010. Photo: Noah Seelam/AFP

New Delhi: The Union government on Monday moved to mitigate the fallout on the energy sector of the 25 August Supreme Court verdict declaring illegal all coal block allocations from 1993 to 2010.

The government proposed to the court that 46 coal mines—40 fully functioning with attached power/steel plants and six with existing power/steel plants but where no mining is taking place—could be conditionally exempted from deallocation.

Attorney general Mukul Rohatgi informed the court that the government doesn’t “want to go out on a limb to save anybody" and is happy to proceed with fresh auctions of the remaining blocks for violations of the provisions of the Mines and Minerals (Development and Regulation) Act, 1957.

“We want to start with auctions", he added.

The case will be taken up on 9 September for a likely final decision.

The Supreme Court’s 25 August ruling on the illegality of all coal mine allocations in 1993-2010 came as it heard several cases related to the improper allocation of these mines—a process, that according to the government’s auditor, had caused a loss of 1.86 trillion to the exchequer.

Rohatgi said the 46 blocks would pay 295 per tonne of coal they’ve used to recompense the loss caused to the exchequer and sign long-term power purchase agreements with state grids for power.

The apex court’s decision to declare the allocations illegal has sent ripples through the metals, mining and power sectors, and also through banks that had loaned money for mining and power projects.

It has since been pointed out that scrapping all allocations would also create a power crisis.

Senior lawyer K.K. Venugopal, representing the Coal Producers Association, offered to submit additional documents regarding their investments and said the generation of 58,000 megawatts of power would be at risk if the allocations were scrapped.

The special bench hearing the coal scam cases, in order to come to a conclusion on the consequences of declaring the allocations illegal, asked three industry bodies—the Coal Producers Association, the Sponge Iron Manufacturers Association and the Independent Power Producers Association of India—and the Union government to submit affidavits by 8 September.

Apart from the 40-odd functioning coal blocks, Chief Justice of India R.M. Lodha said it would be better to “start from a clean state", as these coal blocks only amounted to nearly 7% of coal demand. “Let us all help in removing the darkness bit by bit," he added.

Scrapping allocations where no coal is currently being produced would have a marginal impact as only “those allottees expecting production to start in the next two years will be affected," said Dipesh Dipu, a partner at Jenissi Management Consultants.

Non-serious companies would “have anyway stopped investing after the Comptroller and Auditor General’s 2012 report" on losses to the exchequer, he added.

While Prashant Bhushan, representing non-governmental organization Common Cause, asked for deallocations across the board, the court was inclined to consider all available solutions.

Lawyer Abhishek Manu Singhvi, representing one of the affected associations, countered the large-scale deallocation plea by appealing to the court’s earlier consideration in the 25 August decision, where it had said it would keep the question of quashing the allocations open.

A suggestion for an economic analysis of the possible impact of deallocation was made by lawyer K.V. Vishwanathan, representing two parties, Tata Sponge Iron Ltd and CESC Ltd.

The court was clear that it had to “balance equities".

“The burden to be shared (in terms of the penalties) should not be borne just by the private companies. The government too should share some part of it, since the rules of the game were not really framed by the private companies, but by the government," said N.R. Bhanumurthy, a professor at the National Institute of Public Finance and Policy in New Delhi.

And “this will again be a retrospective penalty, which we really don’t want", he added.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 01 Sep 2014, 04:08 PM IST
Next Story footLogo
Recommended For You
Energy Stocks
₹1,870.1-2.52%
₹160.8-3.45%
₹495-2.66%
₹82.54-0.12%
₹317.15-1.18%
Switch to the Mint app for fast and personalized news - Get App