The Supreme Court needs to decide fast on the fate of nearly 220 coal blocks it has declared illegal, finance minister Arun Jaitley said , as the nation grapples with already bad fuel shortages. The court will hold a hearing on Monday to consider what to do with the 218 coal licences awarded to companies over the past two decades to fuel their steel, manufacturing and other plants that it has pronounced illegal.
The court ruling last Monday "moves the system toward fairer allocation of resources", Jaitley told reporters. But he added, "We cannot allow the fate of these coal blocks to hang in mid-air. They need to be utilized." Analysts have warned prolonged uncertainty could be disastrous for the already struggling energy sector and lead to fuel shortages at manufacturing and power plants and more electricity blackouts.
India relies on coal to generate nearly two-thirds of its electricity. The court said in its ruling there were "legal flaws" in the transparency of the coal block awards. It said it might set up a panel of retired judges to investigate the matter further.
The ruling stems from a 2012 charge by the national auditor that the government underpriced coal mines and giving away as much as $33 billion in windfall gains to companies. "The question is whether the court will simply levy a penalty against companies like Hindalco and Jindal or take away their licences," Alok Brara, publisher of leading industry magazine PowerLine, told AFP this week. "If it's simply a case of penalties, people will deal with that, but if it's a question of auctioning the blocks, that could make things more complicated".
Power woes In 2012, when the previous Congress government was in power, the Supreme Court cancelled 122 telecommunications licences sold at below-market prices, causing upheaval in the fast-growing cellular industry. India has one of the world's biggest proven reserves of coal but disarray in the sector means demand outstrips supply. Lack of power is a drag on economic growth with the peak-hour deficit—the gap between supply and demand—at 12%.
NTPC, India's biggest utility company, already warned before the ruling supplies at many power plants were severely depleted. Analysts say failure to overcome India's power woes could scupper hopes of new Prime Minister Narendra Modi of engineering a strong revival of Asia's third-largest economy. New legislation to auction coal blocks instead of awarding them through a government-screening committee became law in 2010. But no auctions have been held.
Just 33 of the coal blocks singled out as illegal are in production, according to investment house CLSA Asia-Pacific Markets. The government has already seized back 80 blocks because they are not being mined. India's family-controlled Jindal Steel and Power and Reliance Power Ltd, steered by billionaire Anil Ambani, are among firms with the most to lose from the ruling, analysts say.
Their shares have plunged on worries they will be unable to exploit coal from their "captive mines" to fuel their industrial plants. In another development, federal police dropped a corruption case against leading industrialist Kumar Mangalam Birla, who was accused conspiring to obtain a coal block at a cut-rate price nearly a decade ago, due to lack of evidence.