De-allocation of coal blocks not practical solution: Parakh

Former Coal Secretary PC Parakh in an interview to CNBC-TV18 believes that wholesale de-allocation of coal blocks is not an option as it could have catastrophic consequences for the economy.

The Supreme Court has pronounced the terms under which coal blocks were allocated post 1993 as illegal but stopped short of deallocating the blocks. The conseqence of illegality will be determined on September 1, 2014.

The apex court observed that the issue of de-allocation will need further hearing, but barred UMPPs from exploiting captive mines.Below is the transcript of PC Parakh’s interview with CNBC-TV18's Shereen Bhan.Q: The Court has had some scathing things to say about what the government has done from 1993 onwards as far as the steering committee process is concerned non-compliance of procedures under the MMDR, non-compliance of the Coal Nationalisation Act etc. To my mind if I were to ask you about the road ahead now because the Court is going to hear this matter on the September 1 it has stopped short of de-allocating coal blocks, what do you think is the best way forward given the fact that the Supreme Court itself says that coal is king and the paramount lord of industry?A: It is a very difficult call to make for the Supreme Court, and the government because the implications of de-allocation are very serious for the Indian economy. I hope that on September 1, when the Court again hears the case, it will find some kind of a via media solution which ensures that the country’s economy does not suffer. At the same time people who have got blocks allocated by misrepresentation of facts, or for wrong reasons may perhaps suffer.  However, if all coal blocks are de-allocated wholesale it can have very serious implications for India’s power sector and India’s economy as a whole.Q: It could have a very serious implication and hence I ask you this. What kind of via media could we expect because the Supreme Court has said that all 36 meetings of the steering committee starting 14-07-1993 have suffered from the vice of arbitrariness and legal flaws? So what kind of via media can the Supreme Court the look at, could there be punitive damages as far as these allocations are concerned and that then puts this matter to rest?A: It is extremely difficult to say what the SC will decide because I myself is not in a position to say that if some injustice has been done whether it can be now corrected but the short point is that de-allocation wholesale is not a practical solution. Therefore also gave some suggestion today that they may like to have a committee appointed which will go into all the relevant issues and then make recommendation to the government as to how it should proceed.

Q: In your assessment now is competitive bidding or auction the best way forward because, let me just take you back to what has happened in the Goa High Court just a few days ago - where the Goa High Court has basically said that renewal of mining leases is legal and it is something that the government will have to provide state miners, and that is exactly what the Goa government has now been forced to do in a sense. Given that context do you believe that competitive bidding or auction is perhaps the only way or the best way forward?A: To my mind in respect of minerals which have been fully explored at public cost open bidding system is about the best.Q: Without appropriate legislative action whether it is amendments to the MMDR Act or amendments to the National Coal Act, we will perhaps not really see finality, or closure unless we move appropriate legislative amendments?A: In the situation in which we are today, Court will itself have to give some directive as to how the situation has to be handled because all these coal blocks cannot be cancelled wholesale. So some system of regularisation has to be brought about. Now whether it will be through the amendments to coal mine nationalisation act or through the amendments to MMRD Act or by some rule making power with the government some device will have to be found but I don’t think all these coal blocks can be cancelled wholesale.Q: If indeed the Court decides to do what it did in the 2G scam which is cancel all the licenses as it did in the 2G scam and in this case perhaps de-allocate all of these blocks do you believe that that is going to have a catastrophic impact on the economic recovery and on the economy in general?A: Actually coal block stands on a very different footing as compared to 2G scam because implications of de-allocation of coal mines are much more serious than de-allocation of 2G. Coal mine takes in our country anywhere between eight to ten years to start operating, and we are already in serious shortage of coal in the country. Last year we imported almost 170 million tonnes of coal, which is almost 50 percent of our coal requirement in the country. If these coal blocks are cancelled, we are at least five years behind in terms of production of coal which can have serious implications for our power sector.So, the Court will have to take these points into account in finally deciding as to what methods the government should follow to move further in respect of all these coal blocks allotted between 1993 and 2008.Q: I ask you this as a former secretary, because you were very critical of the steering committee and the legality of the steering committee yourself which is what the Supreme Court has reiterated today. If the Court were to now try and look for a via media - whether it is to set up a committee of retired judges to be able to find that via media, what are the options that you would propose before the Court? If I were to ask you in your own assessment given that this dates back to 1993 and 2008?A: My suggestion will be that in respect of all cases where there is no fraud, no misrepresentation of facts or any dubious activity on the part of the allottees like selling away the coal block after allotment has been made those blocks should be allowed to continue.