The Supreme Court on Wednesday cancelled all but four of the 218 coal block allocations it had declared illegal and arbitrary in its >August 25, 2014 verdict . 

Acting on the Central government’s assurance that it is “fully prepared” to face the cancellation of the coal block allocations and will not have any difficulty to take the coal industry forward, a three-judge bench led by Chief Justice of India R.M. Lodha passed the order, opting that the “natural consequence” of its August 25 judgment declaring the allocations would be to cancel them.

On the Centre’s request to save 40 functional coal blocks and six ready-to-function ones, the court said 42 of them would continue to function for the next 6 months, till March 31, 2015, to give the government “breathing space to manage the emerging situation”.

These 42 blocks would have to pay an additional levy of Rs. 295 per metric tonne of coal extracted to make up for the loss highlighted in the CAG report in the coal scam.

The four functional coal blocks exempted from cancellation are two ultra mega power projects, one operated by NTPC and another by SAIL.

Reacting to the order, Attorney-General Mukul Rohatgi, who represented the Centre in the case, told the media that the “government would now decide which of the blocks will be auctioned and which not to”.

He said the six-month gap in implementation of cancellation of 42 functional coal blocks would ensure that the transition would happen with the “least disturbance”.

On the impact of the cancellation on industries, Mr. Rohatgi said “private industries can come back by way of auction”.

Coal blocks: SC rejects private miners’ plea 

In its 27-page order cancelling the allocation of 214 coal blocks on Wednesday, a three-judge Bench headed by Chief Justice of India R.M. Lodha dismissed the argument by private miners’ associations that Coal India Ltd. would not be equipped to handle the post-cancellation challenges.

Private miners had said that cancellation of the blocks would hit investors’ confidence, cause acute distress in some industries, affect 28,000 MW of power capacity, and cause an estimated loss of Rs. 4.4 lakh crore in terms of royalty, cess, direct and indirect taxes, besides raising the cost of coal imports and setting back the process of extraction and effective utilisation of coal by eight years.

Countering this, the court observed that the submission “that the CIL is inefficient and incapable of accepting the challenge is not an issue at all.”

“The Central government is confident, as submitted by the learned Attorney-General, that the CIL can fill the void and take things forward,” the order said.

On the impact of the cancellation on industries, Attorney General Mukul Rohatgi, who represented the government in the case, said, “Private industries can come back by way of auction.”

Opting for cancellation as the “natural consequence” of declaring coal block allocations arbitrary and illegal, the court saved four allocations from the “guillotine”. The four blocks, left undisturbed, are among the 46 illegal coal blocks -- 40 functional and six ready to start operations this year -- the government wanted to be saved from cancellation.

The court made it clear that the order will not affect the CBI’s pending criminal investigation on 12 functional coal blocks.

The court order exempted four blocks. These include two ultra mega power projects -- Moher and Moher Amroli Extension -- allocated to Sasan Power Ltd, Tasra allotted to Steel Authority of India Ltd. and Pakri Barwadih coal block of the National Thermal Power Corporation. Though the Government wanted 46 blocks exempted, the court said the remaining 42 could continue production for the next six months, provided they pay the Rs 295 per tonne levy. This six-month window, the court explained, was merely a buffer time.