India's coal industry caught in litigation maze

New Delhi

THE troubles in India's coal mining industry are far from over.

After the country's Supreme Court cancelled mine permits last year and asked for fresh auctions, the top court has now allowed companies to challenge auction rules.

The move potentially opens the door to litigation that can hamper the government's plan to complete the bids by March 31, a date set by the Supreme Court.

Companies including Jindal Steel & Power and GVK Power & Infrastructure have challenged the bidding rules in lower courts. The Supreme Court rejected a government plea to transfer all cases to it.

A failure to complete the bids on time may result in a shortage of coal and lead to blackouts as peak-demand summer months approach. It could also hinder plans to open the industry to private companies, which was on the government's agenda after the auctions.

Boosting output of coal, which fires 60 per cent of India's generation capacity, is crucial to Prime Minister Narendra Modi's aim to provide electricity for every home.

"This decision would lead to more litigation as companies will approach the high courts with petitions," M Madhunarayan, a Supreme Court lawyer, said in a Feb 3 interview. "Probably, the March 31 deadline for completing the auctions will not be achieved."

One bone of contention is a rule that restricts bidding for larger, lower-grade deposits by reserving them exclusively for power generation. That rule affects steelmakers such as Jindal Steel which had planned to use such deposits at steel plants in Chhattisgarh and Odisha states.

Jindal Steel's managing director Ravi Uppal didn't answer a phone call and text message on his mobile phone, while GVK's Chief Financial Officer, A Issac George, said he couldn't discuss the matter immediately.

The government flagged its concerns over the lawsuits in a submission before the top court on Jan 30, saying that cases were being filed "all over the country" and "thwarting the auction process of coal blocks".

Differing orders being passed by courts is "leading to a complex situation, crippling the auction process, which has to be completed before March 31," according to the submission, a copy of which is with Bloomberg News.

"If all the cases could be transferred to Supreme Court, it would have been easier to contest them at a central location," Coal Secretary Anil Swarup said on Feb 4.

The Supreme Court on Sept 24 cancelled 214 of 218 coal mine permits awarded to companies for their own use, describing the process of awarding them as arbitrary and illegal.

It asked the government to auction the mines that are producing and those nearing production by March 31 to ensure supplies weren't interrupted. About a month later, the coal ministry issued an executive order for awarding 74 mines, with a capacity to produce 210 million tonnes a year, more than a third of the nation's current output.

The first round of auctions for 23 mines received 176 initial bids on Feb 3. Bloomberg