Stopping wrong doer from reaping benefits


The Supreme Court had no good option other than cancelling coal block allocations made since 1993 after it found that they were illegal and arbitrary.

 It has cancelled all but four of the 218 allocations, sparing only ultra mega power plants and central government companies.  Once the allocations of coal fields were found illegal, allowing them to continue operations would have meant a post-facto endorsement of wrongdoing. In a similar situation, the court had cancelled the 2G telecom licences.  It could not have used a different yardstick now, though the consequences of cancellations are different and more difficult. The message is that there is a price to be paid in terms of convenience, reputation and economic cost for undermining public policy to promote private greed. When it is confirmed that allocations made through the screening committee system lacked transparency, consistency and merit, allowing the allottees to continue to benefit from them would not have been right. The ongoing CBI investigation, which the court said should continue, should also fix the criminal responsibility for the illegalities and lead to deterrent punishment. 

The NDA government had, in fact, facilitated the decision by telling the court that it would take things forward and that Coal India Limited (CIL) would continue extraction from 46 coal blocks if the allocations were cancelled. Out of 218 allocations, coal was actually being extracted from only these blocks and allottees were actually squatting on others. The cancellations will come into effect for the functional mines only from March 31, 2015. Since they will be auctioned or handed over to CIL by then, there is hope that supply of coal, which is very important for various industries like power and steel, may not be hit.  There are concerns and consequences that follow from the order which need to be addressed. Some are genuine and others are exaggerated. Banks have advanced large sums of money to many allottees. As they have lost their coal fields, which will be allocated to other parties after possible auctioning, there is no clarity on how the banks will recover their loans. Coal India is not considered to be very efficient in its operations.

lead to shortage, likely import of costly coal and cost escalation for users in the industry. This is bound to be transferred to consumers. The claim of investment loss, however, is exaggerated because those who got the allocations had actually paid nothing for them and have made windfall gains. Assertion of the principle that a wrongdoer should not reap the benefits of his wrongdoing will set a good precedent.

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