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.

of development and regulation is distinct from that of ownership. Ownership of minerals (except offshore minerals) is also with the states and in all cases, the licensing and leasing power is with the states only.

The question is whether the Coal Mines Nationalisation Act or the MMDR Act has been changed to give the Centre power to “allocate” coal blocks. The SC doesn’t think they have.

However, there is no assurance that states will be able to allocate coal blocks in a better way than the Centre given the mining controversy in states like Karnataka, feel experts. What is required is a transparent process, they reckon. “Whether it (allocation) is to be done at state or central level, the zone of discretion should be minimised,” said RV Shahi, a former Union power secretary. If the allocation power is given to states for coal blocks, each coal-bearing state will have to set up its own screening committee for selection of allocatees, in a reversal of the current practice where this responsibility lies within the Centre’s purview and is performed through a national-level committee. This is at a time the Centre is trying to introduce a number of players in the field of coal mining through a somewhat liberal captive coal policy (even as privatisation of commercial coal mining remains a pipe dream). So if the states start allocating coal blocks, the Centre’s ability to manoeuvre the policy space would be constrained.

As for non-coal minerals (such as iron on ore, bauxite, limestone, base metals like lead, noble metals like gold and the rare earth elements), the Centre’s thinking as reflected in the MMDR Bill with the parliamentary standing committee is that auction is the right way for allocation of fully prospected deposits, but extending auctions to other cases indiscriminately might disincentivise exploration. It is reckoned that once bidding is introduced in the case of surficial deposits of these minerals, the Centre’s concurrence would also become redundant and states’ powers will be buttressed, though with lesser scope for discretion. “The MMDR Bill is a move towards decentralisation of power in cases of minerals,” said Dilip Kumar Jena, senior consultant and knowledge manager, mining, PwC.

It remains to be seen if the Centre will try to keep the currently used window to allocate (and hence auction) coal blocks by explaining the legal position to the satisfaction of the apex court or by amending the law

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