New Delhi: The Supreme Court has asked the central government to explain the basis on which it over-rode the powers vested with state governments to allocate coal resources that are under their control.
The apex court also questioned the central government on the procedure it followed while allocating captive coal blocks to private and government companies between 1993 and 2010.
Justice R.M. Lodha, who is heading a three-judge special bench that is overseeing a probe by the Central Bureau of Investigation (CBI) into the allocations, on Thursday sought clarity on how the central government had “justified the procedure they have followed” while allocating the blocks.
“Procedure is opposed to the MMDR Act,” Lodha said. The Mines and Minerals (Development and Regulation) Act, 1957 covers mines and minerals that are under the Union government’s control.
During the hearing, advocate Prashant Bhushan, representing petitioner Common Cause, a civil society body, said that under the statute, “the state government can give coal blocks only with the central government’s consent” and the central government had withheld its consent when state governments approached it.
Bhushan said that by using “its power to deny consent” the central government had usurped the power and granted leases to certain favoured parties. He produced an advertisement by the coal ministry in 2005 inviting applications for allocation of 20 coal and 11 lignite blocks.
Bhushan focused on what he said were procedural flaws in allotments, violation of constitutional principles and non-compliance with relevant statutes in coal block allocation. He sought to convince the court that the licences should be cancelled.
Bhushan also said that a statutory provision requiring a company to have “an end plant for mining” before it could be allocated coal blocks was done away with by the government in 2005-06. Referring to the 2005 advertisement, Lodha remarked that “in 2005 also, it (the requirement) was done away with.”
Asked by the bench why the advertisement had been issued and on whose direction, Bhushan said it had emerged as an outcome of a change in government policy introducing competitive bidding in 2005.
In 2005, the government decided to allocate coal blocks through auctions but the policy was never enforced and it continued to allot blocks on a nomination basis.
“What was the state of affairs when the coal secretary came out with such a note” suggesting competitive bidding be adopted, asked Lodha.
Bhushan further argued that once competitive bidding had been decided upon in principle as the means for allocation in 2005, the government stalled its finalization on technical grounds for eight years.
“Suddenly, 150 coal blocks were allocated within (the years) 2006-09” and “all cronies” were given blocks before the policy was brought into effect and “none of those (coal blocks) was utilized as no one was in the position to” use them, Bhushan told the court. He argued that allotment to companies that were not in the business of power generation, iron and steel or coal washing in itself was a statutory violation that invited cancellation of the licences.
The Coal Mines (Nationalisation) Act, 1973 permits the government to allocate coal mines only to companies already engaged in those businesses.
Bhushan also said that the failure of companies to have started mining in one year from the grant of licence also merited cancellation. He argued that the mines had remained unutilized as the companies did not have the requisite plants.
Lodha remarked that “ultimately mining has not been done substantially. Some of their (private companies’) licence has been cancelled because they could not take action. The mines remain as they were.”
Discussing the technicality involved in auctions and the alleged unfairness in allocations, the bench asked what were “the impediments in auction?” Bhushan responded by saying there had been no impediments and an administrative order to that effect would have sufficed. Such an order, also to be recommended by the law ministry, had not been issued by the government.
Bhushan alleged that major chunks of profits were passed by public sector companies to private companies.
On Wednesday, advocate M.L. Sharma, another petitioner, had argued that joint ventures between state governments and private companies had been entered into with nominal to minor shareholdings given to governments. Such joint ventures had been set up solely to grant massive profits to the private companies, Sharma said.
In the proceedings, to continue on 13 September, the apex court will now hear the government on the issue of allocations. The government will also respond to the arguments of the petitioners and justify its stance on the allocations made and the procedure adopted.