Coal India gains but questions remain

Might press govt to hand over perpetual lease title to the 42 operative blocks the court has asked it to manage

The takeover by central government-owned Coal India (CIL) of 42 de-allocated operative mines from April next year, as ordered by the Supreme Court, might not be an uphill task.

The government-owned player already has operations in those areas, through subsidiaries. But CIL’s plan for these mines would come with a caveat. It would be negotiating hard with the government while formulating the modality for takeover in the coming six months, as the SC left some key issues unanswered from the mining company’s perspective.

CIL would prefer to get the mining lease for those blocks in perpetuity. Senior executives said the order was not clear whether CIL would take over the mines as an interim arrangement and the blocks would be auctioned thereafter. “Unless the SC has directed otherwise, CIL would prefer to get the blocks in perpetuity. It does not make sense to fix the modalities and put up a mechanism to run the mines only as an interim arrangement,” a senior CIL executive said.

The Union coal ministry would discuss the matter soon and a committee comprising representatives from the ministry and Coal India might be set up on how to go about the takeover. “Once the talks advance, the CIL board will formally take up the matter for discussion,” said an official, who did not want to be named.

CIL officials also said they needed clarity on whether the company would have to make payments to the allottees which made irrecoverable investment in the blocks. And, whether the supply from those blocks would be restricted to the end-use projects concerned after the takeover.

“It’s not that CIL has been caught unprepared. During coal nationalisatisation as well, a similar thing happened on a large scale, as CIL took over operations of running mines on an ‘as is basis’ at that point,” said another official.

Former CIL chairman Partha Bhattacharyya said the company would be right if it insisted the blocks be given perpetually. "My understanding of the judgment is CIL has been asked to take over the blocks as an interim arrangement. If CIL asks for these blocks once and for all, it is a valid demand, as anyway a mechanism to operate those blocks would have to be put in by CIL," he said. "There are operative issues like what will happen to the workforce. Initially, CIL might continue with the same contractor who are carrying out the mining operations."

The Supreme Court had on Wednesday scrapped the allocation of all but four of the 218 coal blocks awarded between 1993 and 2010. The court allowed 42 operating blocks time until end-March 2015 to stop operations. These are expected to be run by CIL, which has been given six months to "adjust to the changed situation and move forward".