Coming full circle from Nationalization to a complete Privatization
When government should be exploring alternative sources of energy, it seems India has chosen to back the fossil fuel industry at least for the near future.
Coal has been part of India's history since time immemorial. It was first commercially mined in 1774 from Raniganj coalfield, West Bengal. Introduction of steam locomotives and the First World War were major events which spurred both the production as well as the importance of coal in India. The exploitation of coal miners and their abysmal working conditions have been captured in many a Bollywood movie over the years. Coal played a major role in Britain's industrial revolution, which in turn had a trickle-down effect in India. Our country yet again became the perfect host for British imperialistic greed. Post-Independence, the coal industry became synonymous with the exploitation of workers. What is surprising is that this remained so till as recently as 2014 when the Supreme Court decided to sanitise the industry from some of the entrenched unscrupulous practices such as allocation of coal blocks in an opaque manner causing huge revenue loss to the exchequer.
Coal industry's ground reality was brought to the fore in a landmark PIL judgment, Manohar Lal Sharma v. Principal Secretary and Ors.; (2014) 9 SCC 516 passed by the apex court. The basic grouse raised by means of the PIL along with other similar petitions was the complete disregard for applicable laws and tenets of propriety during the allocation of coal blocks in the country. For a developing economy like ours, coal is the backbone mineral and one of the most important natural resources, if not the only one. Any impropriety in its commercial exploitation is a fatal blow to the future of the country. It was in this context that the Supreme Court treated the issue with the sincerity it deserved. The operative period under consideration was the allocation of coal blocks for the period between 1993 and 2012. The PIL sought a quashing of all allocations made during this time period along with a court-monitored investigation of the allocations.
The court observed in the PIL judgment that the practice and procedure of allocation of coal blocks by the Central government through the administrative route was clearly inconsistent with the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Coal Mines (Nationalization) Act, 1973 The Court stated that the allocation of coal blocks for captive consumption by the Central Government was clearly incongruous with the role of state governments outlined in the MMDR Act. The state governments were rendered powerless by-standers which was never the legislative intent to begin with. It was further held that the grant of coal blocks amounted to grant of largesse as the letters of allocation issued by the Central government paved the way for grant of prospecting license or mining lease.
On the aspect of transferring and alienating natural resources, emphasis was laid on the duty of the State to adopt a method of auction that enables everyone to participate by giving wide publicity. The court noted that auction as a method had to be considered in two ways. Firstly, "Legitimate Deviations from Auction" and secondly, "Potential of Abuse". Under the former while relying on the Constitution Bench Judgment in the matter of CPIL v. UOI; (2012) 3 SCC 1, it was reiterated that there is no constitutional mandate in favour of auction under Article 14 of the Constitution. Under the latter, it was reiterated that the potential for abuse can never be the sole factor for holding a method including auction as unconstitutional. It was also clarified by the court that it is not in its domain to do a comparative analysis of competitive bidding along-side other methods of transferring and alienating natural resources. However, if such a method falls foul of Article 14 of the Constitution then certainly consequences will follow. The court undertook a detailed exercise to outline various infirmities in the allocation of coal blocks after a Screening Committee was set up under the aegis of the Central government and also under the government dispensation route.
In a subsequent judgment, the Court in the matter of Manohar Lal Sharma v. Principal Secretary and Ors.; (2014) 9 SCC 614 further clarified the consequences of the aforementioned judgment delivered in the PIL. The court observed on a cautionary note that it hoped the government would not deal with natural resources that belong to the country as if they were at the personal disposal of a few individuals. The court also imposed a compensatory levy on the coal extracted from a part of the allottees even as it directed the Central Bureau of Investigation to take the investigation pending against certain allottees to its logical conclusion. The investigation conducted by the CBI was analysed threadbare and various directions were issued by the Court in the matter of Manohar Lal Sharma v. Union of India; (2017)
The scrapping of coal block allocations led to the enactment of Coal Mines (Special Provisions) Act of 2015 aimed at bringing the coal blocks back to the private sector by means of auctions. The Coal Block Allocation Rules, 2017 were also enacted to pave the way for competitive bidding of coal blocks. As recently as June 2020, the Central government initiated auction of 41 coal blocks leading to an investment potential of Rs. 33,000 crore of capital investments over the coming years apart from allowing hundred percent foreign direct investment. With the introduction of the Mineral Act (Amendment) Bill, 2020, the private entities who could only use coal for captive consumption till now have been allowed to sell coal as well. Thus, the coal industry has come a full circle from nationalisation to a complete privatization. The PIL was also speculated to have far reaching effects on the power and banking sector.
To conclude, the role of the Supreme Court in in ensuring fairness and transparency to a process which has been historically marred by opaque governing policies needs to be applauded. The PIL judgement was a clear indictment of crony capitalism and a signal that the status quo needs to change. Certain sectors have complained that such a decision has had an adverse effect on the economy. However, it should be noted that the court has balanced economic interests with procedural propriety while issuing directions such as scrapping of coal block allocations. Another aspect is the introduction of competitive bidding thereby making way for private entities to enter the field. The Central government has opened the doors wide open for both private as well as foreign players. Skeptics, however, have criticised the move saying it comes at the expense of neglecting environmental concerns.
India being a signatory to Paris Agreement has pre-defined carbon emission reduction goals. With these developments, the Central government has sent a signal that coal still remains a predominant source of energy for the country. In today's times when governments should be increasingly exploring alternative sources of energy, it seems India has chosen to back the fossil fuel industry at least for the near future. Leaving aside environmental concerns, certain questions have also been raised with regard to the Central government policy of allowing not only private players but also foreign players into the fray. No doubt such a decision will incentivise optimal extraction of coal, however, the attending cost needs to be kept in mind. Entry of foreign players will pose a challenge to domestic private players, who until now were largely protected. Foreign players also may not have domestic interests in mind.
Although, the previous conduct by the state in so far as questionable allocation of coal block was concerned is exactly what has led us down this rabbit hole, we must be mindful of the fact that it is the State which is in the best position to assess the needs of a sector. The concept of State and also jurisprudence pertaining to any particular field is never a static concept. Therefore, we must put our faith in the State to enact the best policies that balances commercial interests with a public purpose. It is towards this end that we must put faith in the state as many concerns have been raised due to recent policies and it is the duty of the State to acknowledge and address them.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.