The finance ministry has raised serious questions on whether the government may face a legal backlash from aggrieved parties - power and steel companies that had been awarded captive coal blocks - if it chooses to de-allocate the blocks.
With less than 48 hours before the inter-ministerial group (IMG) recommends the fate of the blocks, the ministry has picked several holes in the de-allocation plan.
The IMG - a panel of bureaucrats headed by additional secretary in the coal ministry Zohra Chatterjee - completed reviewing the production delays in 29 blocks handed out several years ago. The panel will finalise its recommendations on Wednesday.
Objecting to stripping the companies off their fuel linkages, the department of economic affairs told the IMG in a note last week: "Any (such) decision (by the IMG) will have both legal and financial implications. International arbitration can also not be ruled out."
Sources told HT that about 12 blocks faced the axe as work on the mother projects were unlikely to make any progress before 2013. Only four blocks where progress is satisfactory and seven others located in Maoist-dominated areas are safe for now.
The ministry said in a note to the IMG last week: "It is best left to the administrative ministry to decide … in consultation with all concerned, particularly the ministry of law."
Earlier, an unrelenting opposition launched a no-holds-barred attack on the UPA government after the CAG estimated that coal block allocations to private companies might have robbed the exchequer of Rs. 1.86 lakh crore.