However, non-governmental organisations are demanding the government cancel all blocks allegedly allotted illegally and let new companies take over the equity of all allottees after an auction.
Indian companies have invested close to Rs 2 lakh crore in coal mines and related industries and any blanket cancellation of blocks by the government or the apex court will result in huge losses.
“No company will be ready to invest in India if billions of dollars of investments are made to go down the drain and the government goes back on the contracts signed a decade ago on coal blocks. There should be a distinction on blocks allotted to the companies operating via post boxes and genuine companies that have invested billions and created jobs,” said an official of a top conglomerate asking not to be naming.
Almost all top Indian companies, including those belonging to the Tata, Birla, Jindal and Vedanta groups, have been allotted coal blocks by the government in the past decade.
Governments to blame
The Confederation of Indian Industry (CII) says companies should not be penalised if the clearances for mining had not come from the government.
"The decision to give clearances lies with the central and state governments. The parties to which coal blocks have been allocated can only initiate action for getting clearances. If allottees have taken action and clearances have still not been given, the responsibility lies with the central and state government. If action has not been initiated then only the fault will be with the allottee,” says Chandrajit Banerjee, CII director general.
The Union government’s statement on Thursday that it would reply to the court by next week on cancellation of coal blocks has also alarmed bankers. Most Indian banks have exposure to the sector.
“Like the 2G spectrum licence cancellation, the coal blocks cancellation will impact banks, as they have lent money for coal mining as well as for power and steel companies,” said a banker. The sale of the Indian assets UK’s Stemcor worth $1 billion is stuck because of uncertainty over coal block allocations and M B Shah panel’s report on the iron ore industry, say bankers.
In contrast, corporate governance advocates say while cancelling the blocks, the government should let new companies take over the equity of those which are hoarding coal blocks. “Much of the investment would have been made by banks in the form of debt, which can be taken over by those companies that will be allocated these blocks when an auction is conducted in a transparent manner,” says Shriram Subramanian, founder and managing director, InGovern Research Services, a corporate governance advocacy organisation.
Just because billions of dollars have been invested doesn’t absolve companies of wrong-doing or give them the right to operate the coal blocks now, he says.
“Just like with the telecom 2G licences, first the allocations should be cancelled, as it was wrongly done — without any bidding process and on an ad hoc basis, facilitated obviously through speed payments. The companies that have been involved in the coal scam have to pay the price for wrong-doing, and if they have to write off their billions of investment or give that away in a fire sale, so be it,” he added.
PUNISH OR PARDON?
Indian companies have invested close to Rs 2 lakh crore in coal mines and related industries and any blanket cancellation of blocks by the government or the apex court will result in huge losses. “No company will be ready to invest in India if billions of dollars of investments are made to go down the drain and the government goes back on the contracts signed a decade ago on coal blocks,” says an official of a top conglomerate on condition of anonymity.
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