The Telegraph
Tuesday , August 26 , 2014
CIMA Gallary

Mining bar on state-level PSUs

- Apex court vetoes joint ventures
A labourer loads coal onto a truck at a railway yard in Gujarat. File picture

Aug. 25: The Supreme Court judgment that has termed the allocation of 153 coal blocks “illegal” has said that “commercial mining cannot be carried on by state governments and state public sector units”.

It has also ruled that a “joint venture arrangement” is impermissible.

The court has said only an undertaking satisfying the eligibility criteria — it should have a unit engaged in the production of iron and steel and generation of power and washing of coal obtained from a mine or production of cement — is entitled to the allocation in addition to the central government, a central government company or a central government corporation.

In Bengal, 19 blocks have been allocated since 1993, the year from which the Supreme Court looked at the allotments.

Out of the 19, as many as 13 are allocated to public sector companies and the rest to the private sector.

Four of the five blocks allocated to the West Bengal Mineral Development and Trading Corp, a state PSU, are meant to be used by private companies, JSW of the Jindals and Jai Balaji. At least nine mines, mostly in the public sector, are now in production, while the rest are still to be developed.

But JSW and Balaji do not have joint ventures with the state PSU. Whether the coal mining arrangements they have entered into with the PSU come under the commercial category is not clear as the mines are not yet operational. JSW and Balaji want to set up steel and power plants.

But one state-level PSU is said to have joint ventures with a private firm.

In the judgment, the Supreme Court dwelt at length on public sector units.

Interpreting Section 3 of the Coal Mines Nationalisation (CMN) Act, the bench said the provision vested the right, title and interest of coalmines in the central government.

No person other than the central government or a government company or a corporation owned, managed or controlled by the central government shall carry on coal mining operation in any form, the law says. (Other than for Coal India and its subsidiaries, the Centre leases the mining rights while retaining the ownership.)

“In other words, commercial mining cannot be carried on by the state government or the state PSU. The expression ‘government company or a corporation owned, managed or controlled by the central government’ means a government of India public undertaking. It does not include state government public sector undertaking,” Chief Justice R.M. Lodha said.

The apex court said the state government or state public sector undertakings are entitled to obtain sublease of reserves of coal in isolated small pockets.

“The ‘isolated small pockets’ are those which are away from the main coalfields and have limited known reserves which are not sufficient for scientific and economic development in a coordinated and integrated manner and the coal produced from such areas would mainly be utilised for local consumption without transportation by railways,” the court explained.

The recommendation for allocation (by the screening committee and through administrative orders) is, “therefore, in violation of the provisions of the CMN Act”.

Moreover, the state PSUs, besides having been allocated coalmines for commercial purpose, have also been allowed to form joint venture companies, with 51 per cent shareholding by state PSUs and 49 per cent by private company.

“Allocation of coal blocks to the state PSUs which ultimately on getting mining leases may enable them to win or mine coal commercially is clearly in breach of the provisions of the CMN Act,” the bench said.

“No state government or public sector undertakings of the state governments are eligible for mining coal for commercial use…. The joint venture arrangement with ineligible firms is also impermissible. Equally, there is also no question of any consortium/leader/association in allocation,” the bench added.