India's Supreme Court Scraps Allocation of 214 Coal Blocks

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Researched by Industrial Info Resources India (Delhi, India)--In a landmark judgment, the Supreme Court of India on Wednesday quashed 214 of the 218 coal block allotments that were made by different central governments since 1993. Last month, the court had ruled that all coal block allocations since 1993 had been made illegally and arbitrarily.

The apex court, however, spared allocations to state-run Steel Authority of India Limited (SAIL) (BSE: 500113) (New Delhi) and NTPC Limited (BSE: 532555) (New Delhi); and to an ultra-mega-power project.

Companies whose allocations were cancelled were given six months' time to wind up their operations in the coal blocks. The court also asked the holders of 46 operational blocks to file replies within six months.

The court also ruled that the companies would have to pay for the loss as compensation for the non-operation of the mines, taking into account India's estimate that there was a loss of $4.85 per ton due such non-functioning mines. As a result, the Supreme Court has imposed a penalty of $4.85 per ton on all of the former coal-block holders, directing them to pay for all the coal they have used until March 31, 2015.

The Supreme Court recognized the public-interest litigation (PIL) that was filed by Prashant Bhushan, an Indian lawyer, activist and politician, in 2012. He sought cancellation of coal blocks allotted by the government, contending that the government illegally and unfairly favored some private companies.

The court, which examined the allocation of 218 blocks, held that they were done in an illegal manner by an "ad-hoc and casual" approach, and "common good and public interest suffered heavily," due to lack of fair and transparent procedures, resulting in "unfair distribution" of the "national wealth".

Soon after the court's verdict, companies whose coal blocks were de-allocated saw their share prices plummet. However, stocks of coal and power major Coal India Limited (CIL) (BSE: 533278) (Kolkata) and NTPC were, unexpectedly, surging.

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