SC order a testing time for Power and Coal Minister Piyush Goyal

The Supreme Court's order on Wednesday to cancel the allocation of 214 coal blocks has put Power and Coal Minister Piyush Goyal to test. Goyal, in a recent conversation with Business Today, had expressed confidence of finding a solution not only for the mines but also for the bankers who had lend money to these projects. According to rough estimates, Rs 1.5 trillion worth of bank money is at stake.

A bench headed by Chief Justice of India R.M. Lodha has allowed 40 producing mines time till March 31, 2015, to wind up their operations.

The court ruling follows its August 25 order declaring as illegal 218 coal blocks allocated without auction between 1993 and 2010 by various governments. The court also asked the allottees to pay a fine of Rs 295 per tonne from the time the coal was mined.

According to industry estimates, the government might pocket Rs 8,000 crore to Rs 10,000 crore from this penalty. These mines were producing roughly 37 million tonnes of coal. Six more mines were expected to start producing soon, and another 13 in next one year. By March 2015, production was expected to reach 52 million tonnes.

Analysts and bankers say the court order has ended the uncertainty surrounding the coal blocks. "The government needs to expeditiously devise the parameters of coal block bidding and start the bidding process as soon as possible.

This will ensure minimum disruption for affected companies," says Debasish Mishra, Senior Director, Deloitte in India.

State Bank of India Chairperson Arundhati Bhattacharya concurs with Mishra. "We now look forward for a quick plan of action for ensuring that coal supplies are not disrupted and thereafter a swift and transparent bidding process for reallocation," she says.

Goyal had previously indicated to BT that the government wanted to first allot these producing mines through a new policy, which is likely to be a bidding process.

Coal ministry officials say they are confident a new policy for coal block allotment can be put in place within six months. The ministry might also table, in the next session of Parliament, amendments to the Mines and Minerals (Development and Regulation) Act and the Coal Mines Nationalization Act.

The government is also keen to move the coal regulator bill in the forthcoming session. Goyal had also said that he planned to bring in new system where coal blocks might be allocated after seeking all permissions. With the final court verdict now out, it has to been seen how he delivers what he had promised.