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Coal Mines Nationalisation Act was an ill-conceived law

The Supreme Court (SC) has pronounced that all allocation of captive coal mines since 1993 is illegal. This is an indictment more of the law successive governments violated by allocating coal mines for captive use than of the conduct of the governments themselves. The Coal Mines Nationalisation Act of 1973 was an ill-conceived law that made mining of coal the monopoly of the central government (part of the illegality identified by the SC is allocation of coal mines to state government-owned enterprises).

 This made Coal India the arbiter of India's energy supply. Swiftly realising the inherent danger of coal shortage choking off economic growth, the law was amended in 1976 and in 1993 to allow captive mining by those engaged in production of iron and steel, cement and power or in coal washeries.

The reality is that any allocation of a captive mine bestows undue benefit on the allottee, however he is chosen, in the sense his cost of coal would be lower than what it would be, had he to purchase it from Coal India or a mine abroad. This undue benefit does not depend on the method of allocation, but on the very policy of captive mining. And the captive mining policy was necessitated by state monopoly in coal mining. So, the crucial remedy was to scrap the Coal Nationalisation Act.

But there was no political support for such a move. In its absence, the choice was either to hobble the economy by sticking to the law in letter and spirit or to allocate captive mines to those who would mine India's plentiful reserves of coal and produce power, steel and cement. Governments chose the latter course, but in an entirely arbitrary, non-transparent fashion.

Of course, politicians and babus at the Centre and in the states run by all the major parties made pots of money in the process of allocating captive mines. The court has not established the culpability of such acts. Nor does it find fault with the government not finding it feasible to hold auctions for allocating captive mines without amending the mining law. What the court does make clear is the need to scrap state monopoly in coal.

Source: The Economic Times