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Coal scam: What next after the Supreme Court ruling

The Supreme Court on Wednesday cancelled all but four “illegally” allocated coal blocks since 1993 saying they were arbitrary and there was no basis behind them. The four coal blocks that were spared are government-run, non joint ventures, two of them in Madhya Pradesh and two in Jharkhand. These coal blocks were allotted to Coal blocks allocated to PSU-SAIL, NTPC and two for Ultra Mega Power Projects.

india Updated: Sep 24, 2014 19:45 IST
HT Correspondent
HT Correspondent
Hindustan Times
coal blocks allocation,supreme court,illegal coal blocks

The Supreme Court on Wednesday cancelled all but four “illegally” allocated coal blocks since 1993 saying they were arbitrary and there was no basis behind them.

The four blocks that have been spared are government-run non-joint ventures.

What has the SC said?
Coal block allocation procedures were non-transparent and arbitrary.
On Wednesday, it asked the holders of 46 operational coal blocks to file a reply in 6 months.
It said that the inquiry by the CBI into the case will continue and that its observations and findings on the issue will have no bearing on the probe.
It granted a "breathing time" of six months to companies whose blocks were cancelled to wind up business.
It ordered auction of mines after cancellation of licences and gave the government six months to do so.
It allowed illegal coal mines to keep producing until March 31, 2015.
It accepted the CAG's estimate that there was a loss of Rs. 295 per mega tonne due to the non-operation of the mines.

What next?
The cancellation of coal blocks could push up banks’ NPA levels as power projects could get stuck.
More than half of India’s power is produced from coal. State-owned Coal India Limited (CIL) accounts for nearly 80% of the country’s coal output, but it is not enough to meet India’s rising energy demand.

Read: Supreme Court scraps 214 illegal coal blocks, markets down

How will it affect companies?
India’s power projects could be the worst affected because of the ruling and the of cancellation of coal blocks.

How will it affect consumers?
For consumers it could end up raising tariffs as companies could charge more to cover for higher cost of coal that will have to buy through auction.

What had the CAG said?
A CAG report of 2012 said that arbitrary allocations during 2005-2009 had robbed the Centre of a potential revenue of Rs. 1.86 lakh crore.

How were the coal blocks allocated?
Coal fields were allocated by a screening committee.

When was the screening committee formed for the first time?
It was formed in 1992.

Read: A timeline of India’s troubled coal sector

Who were the members of the committee?
The coal secretary chairs the 13-member committee comprising representatives from state governments, ministries of environment, steel, and railway among others.

How were the coal blocks allotted?
Interested firms were ranked on the basis of different parameters such as land and environmental clearances.

Why didn't the government call for bids?
The previous UPA government maintained that state governments had opposed a process of bidding.

How different or similar is this to the 2G spectrum scam?
Many of the “coalgate” companies, it was alleged, may have used the allotted mines to raise money from the market at hefty valuations.

What about the auction policy?
Last year, the previous government had approved a policy to give coal-mining licences to private companies through competitive bidding.

Coal fields will be auctioned through a transparent competitive bidding.

Blocks put up for auction will come pre-approved with preliminary environmental clearance.

According to the policy, successful bidders will have to make production-linked and upfront payments.

Read: SC to CBI - Don’t file coal scam closure reports

Read: India's IDBI says has near $328 mln exposure to cos affected by coal ruling

First Published: Sep 24, 2014 15:20 IST