India’s Top Court Revokes Coal Leases
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Version 0 of 1. MUMBAI, India — India’s top court on Wednesday canceled years’ worth of coal field leases, a judgment that drew wide attention in a nation with persistent fuel shortages. The leases, an earlier investigation had found, had been sold below market price and cost the government about $30 billion, a scandal that has added to concerns of corruption and crony capitalism at high levels. The corruption accusations have been particularly damaging to former Prime Minister Manmohan Singh, who headed a government led by the Indian National Congress party and previously was chief of the Coal Ministry for part of the period under investigation. In a ruling last month, the court found that the government’s process of granting coal mining concessions lacked accountability. “On many occasions guidelines had been breached, the approach casual and at times illegal,” Chief Justice R.M. Lodha said in that ruling. The court on Wednesday upheld its earlier decision and ruled that the coal blocks should be reallocated. In total, the Supreme Court of India canceled the allotment of 214 coal fields granted by the government between 1993 and 2009 to steel, cement and power companies. The ruling is the culmination of a two-year investigation into the allocation of coal leases by the government, initiated after a report by the federal auditor in 2012. The move raised concerns about the effect of closing down coal mines on India’s already beleaguered energy industry. “The Indian power sector has been crippled for the last few years by the shortages of coal and of gas, and many power generation plants based on coal are already working well below capacity,” said Surendra Laxminarayan Rao, the former director general of the National Council of Applied Economic Research. “There is a huge shortage of power in the country, and it is in that context that one must look at this judgment.” The court noted that not more than 7 percent of India’s coal came from the fields in question. “This judgment will not affect the supply of coal in a significant manner,” said R.N. Sharma, former chairman of Coal India, the main government coal company. He added that many of the coal blocks were extremely small and had yet to start production. But industry experts said that the government would have to take swift action to ensure coal supplies were not curtailed. Prashant Bhushan, the lawyer who filed the petition to the Supreme Court for cancellation of the coal block allocations, called the ruling “historic.” He added, “They have held in their follow-through judgment that none of these companies can be allowed to engage in coal mining.” The court declared that companies that have already mined the coal fields would be fined 295 rupees, or about $4.85, per metric ton extracted since the leases were granted starting in the early 1990s. The companies were given six months to wind down operations before handing over their coal fields, which will then be operated by Coal India. The government could either put the mines up for auction or allocate them to government-owned companies. Private power and steel companies, whose stocks began to plummet soon after the verdict Wednesday, criticized the Supreme Court’s decision, saying that the ruling would hurt the business environment. “The entire government machinery was involved right from inception of the coal block allocation process, and today this decision has come,” said Randhir Zaveri, a spokesman for Jayaswal Neco Industries, a producer of iron and steel castings that also operates coal and iron ore mines. “Apart from the drastic monetary impact on individual companies, trust over the functioning of the government is lost.” Others took a positive view of the judgment. “Uncertainty is possibly the worst enemy of growth,” said Arundhati Bhattacharya, chairwoman of the State Bank of India, referring to the two-year investigation. She added that she looked forward to “a swift and transparent bidding process for reallocation.” |