Delhi high court says clubbing end-uses of coal mines

10 October 2016

The Delhi high court on Wednesday held that clubbing separate and distinct end-uses of coal mines for an auction would result in unequals being treated equally and lead to arbitrariness.

A bench headed by Justice Badar Durrez Ahmed, however, dismissed pleas by four companies against the Centre’s decision to classify coal blocks into either power or non-power categories during the 2015 auction due to different reasons.

The four companies — Monnet Ispat and Energy Ltd, Jayaswal Neco Industries Ltd, Bhushan Power and Steel Ltd, and Utkal Coal Ltd—had challenged clubbing of specific end-uses of the mines and contended it to be in violation of provisions of the Coal Mines (Special Provisions) Ordinance, 2014, which has now been replaced by an Act.

Recognizing that clubbing of end-uses would have an adverse impact on the core sectors, the 94-page order held, “Requirements, mechanics and economics for bidding for coal blocks with specific end-uses would be different, putting them together in one category would be adversarial.”

Prospective bidders who would want to use coal for a specified end-use such as ‘iron and steel’ would be different from bidders who wanted to utilize coal for ‘cement’ or for ‘captive power plants’, the order held.

It was alleged that the Centre did not have powers to club or split the end-uses of coal mines. For instance, the end-uses of ‘iron and steel’ and ‘cement’ could not be clubbed together. It was further submitted that the Centre could not create a new end-use called ‘non-regulated sector’.

Monnet Ispat contested the change of end-use of the mine, Gare Palma IV/5, from the production of iron and steel to being classified for the non-regulated sector. Similarly, Bhushan Power said that it could not bid for Jamkhani coal block in Odisha if aluminium companies were also allowed to compete.

Jayaswal Neco, Monnet Ispat and Utkal Coal Ltd had also challenged the clubbing of end-uses after they found themselves unable to compete under the auction process.

It was submitted that allowing clubbing of specific end-uses would result in violation of a level playing field as one end-use would have an advantage over the other.

Specified end use has been defined to mean production of iron and steel, generation of power including the generation of power for captive use, washing of coal obtained from a mine, cement and other end-use as the Central government may specify.

Under a Central government notification dated 18 December, 2014, all coal blocks were categorised into ‘regulated’ and ‘non-regulated sector’ based on their end-use.

The new classification, ‘non-regulated sector’ was to include ‘iron and steel’, ‘cement’ and ‘captive power plants’- all of which were separate end-uses. Such clubbing of distinct and specific end uses was challenged by the power companies.

Source – Livemint