Scrap the allocations

The government’s admission before the Supreme Court that something went wrong with the allocation of coal blocks should be followed by the next logical step: cancelling the allocations illegally made to private entities. About 40 blocks have already been ‘de-allocated’, and the court has raised the question why allocations involving blocks that do not have forest and environmental clearances cannot be cancelled too. The Central Bureau of Investigation has registered over a dozen cases. Even in the absence of evidence of criminal culpability, there are other reasons for revisiting the entire process: the absence of competitive bidding, and the lack of transparency in the functioning of the screening committee that made the allotments. The investigation process has been beset with

controversies, with files going missing and questions being raised on the role of the Prime Minister himself, as he held the coal portfolio during the relevant period. The Law Minister had to quit after it transpired that he had compromised the ambit of the CBI probe. In addition, the Coal Ministry has issued notices to companies that have failed to record any progress in developing the mines. During his recent media conference, Prime Minister Manmohan Singh admitted that some irregularities did take place, but his defence was that they dated back to the first United Progressive Alliance regime.  The government has also been dismissive of the Comptroller and Auditor General’s estimate of the loss sustained in coal block allotments. A performance audit report said in 2012 the benefit to private allottees could have been as high as Rs. 1.86 lakh crore. In similar circumstances, the Supreme Court had scrapped 122 telecom licences.

There is an impression that cancelling coal block allocations at this stage may jeopardise future investment. Industry bodies feel the companies involved cannot be blamed for delays in the grant of approvals by the Central and State governments, or for delays in developing these mines due to lack of timely clearances. It is true that there are genuine companies eager to develop captive coal mines for their power and steel projects. Many banks also have substantial exposure to this sector and are likely to be alarmed by any abrupt cancellation. However, as one of the judges hearing the case observed, investments made without the requisite clearances cannot be cited as a reason for upholding such allocations. A pragmatic solution would be to discover the appropriate price for a coal block through auction and ask the allottees to pay up; alternatively, successful bidders at the auction could take over the debt owed to banks. In any case, none should be allowed to reap the benefit of illegal allocations.