Coal news and updates

On Wednesday, the Supreme Court confirmed what many had feared: it scrapped 214 of 218 coal blocks allotted to different companies over more than 20 years. Of these, 38 are producing blocks. The court went by the government's assurance that it would manage things even if all the allocations were cancelled. It is now up to the government to quickly explain to the businesses that relied on coal from these 38 blocks, and to the banks that have lent to these businesses and to six more other projects that are ready to start mining the blocks they had been allotted, as to how precisely it proposes to manage things. This judgment has many implications, but the most fundamental one will be to wreck investor confidence. 

 

While auctioning is a good idea, what is any investor's guarantee that some court will not scrap a deal sanctioned by the government of the day, in future based on some other report. It is more than passing strange that the government did not try to salvage 40 mines that already produce coal and six others that are ready to go. Out of these 46, the court has held that only four can run, two allotted to state-run companies and two to the Sasan ultra mega power project. West Bengal, where where seven mines will be shut down, is the biggest loser. But the entire economy stands to lose from this decision. On Wednesday, power and infrastructure stocks, most closely associated with the coal sector, tanked. Banks, which have an exposure reckoned to be close to be Rs73,000 crore to companies whose coal licences have been scrapped, could get hammered next. 

 

The systemic solution is for the government to scrap the coal nationalisation law of 1973, break up Coal IndiaBSE 1.65 % and allow merchant mining by private companies. The illegality of several allocations, in the Supreme Court's view, stems from their beneficiaries being state-level public enterprises and joint ventures, while the law allows only the central government and its enterprises to mine coal. The government should examine the viability of retrospective amendment of the law to remove illegality of such a technical nature. 

 

 

Source: ET