SC remarks on coal allocation could end privilege of PSUs

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SummaryThe Supreme Court’s questioning last week of the Centre’s authority to allocate coal blocks during the hearing of a public interest litigation regarding the ‘coalgate’ will have major implications for India’s coal industry.

The Supreme Court’s questioning last week of the Centre’s authority to allocate coal blocks during the hearing of a public interest litigation regarding the ‘coalgate’ will have major implications for India’s coal industry. If the Centre chooses to take the court’s view for granted, then central and state-level public sector companies except Coal India will lose the privilege of being allocated captive coal blocks on a nomination basis and will have to compete with private companies by taking part in auctions.

If the Centre accepts the court’s view that the extant law doesn’t allow it to allocate coal blocks, it would flow from that the 2010 amendment to the Mines and Minerals (Regulation and Development) Act, 1957, ( MMDR Act) empowering itself to conduct auctions of captive coal blocks — through insertion of Section 11A — and reserve coal blocks for allocation to PSUs on a nomination basis are not legally valid either. Even in the MMDR Bill that seeks to make comprehensive changes in the Act (the Bill is now before the parliamentary panel concerned), the Centre proposes to retain the 2010 amendment, while the overall tone of the Bill is towards reinforcing the states’ prerogative in regulation and development of minerals other than coal and atomic minerals. The Bill not only seeks to retain the states’ status as licensing and leasing authorities but also proposes to amplify it by doing away with the need for prior approval of the Centre for states to issue licences, except in case of coal and atomic minerals and beach sand, which are in a distinct category.

Whatever be the law and its interpretation, the current practice is that coal blocks are “allocated” by the Centre while mining leases are granted by the states concerned. The SC observed that the existing policy amounted to putting the cart before the horse as states have no choice but to grant mining leases to whoever is allocated the block by the Centre. It felt that the Centre has a lot of "legal explanation" to do as the statutory Act empowers only the states to undertake the

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