Note: It is a long story of 20 years, I will try to cut it short and may miss some minute details, just read it as a story for an overview of what happened.
There is an act called Mines and Minerals (Regulation and Development Act) , 1957 which classifies minerals into two types
- Major Minerals
- Minor Minerals.
Coal being a major mineral, the act had a rule that stated, for the mining of coal, a company has to seek an approval from Central Govt in the form of a license. And since mining is done on land, and land being state’s subject, a company also had to seek approval from State too, which wasn’t a big deal.
Coal India company was created under the act Coal Mines Nationalization act in 1976. Due to its inefficiency this PSU couldn’t manage the demand, so post liberalization in 1991 coal mining was opened for private players.
The areas where coal exists and coal can be mined, Govt divided them into coal blocks. And a captive coal mining policy was chalked out, which stated that coal block can be mined with license but for a specific purpose.
i.e., end use of coal block had to be specified. eg for Power generation, cement production, Steel production.
Thus coal blocks were allotted to those who would do business in power, cement, and steel industries. And these businesses were not allowed to sell coal in open market.
In order to do the allocation, Govt appointed a screening committee in 1993 under the ministry of Coal which comprised of senior IAS officers, ministry of Steel, ministry of Railways and other related officials.
This committee was just recommendatory in nature, would screen through the applications, and recommend them to the Central Govt,actual allocation was done by Govt. Once the process started only a few private players showed interest, it was a gradual process.
Upto 2004 the number of licenses allotted were not considerable year on year. To give you estimate, from 1993 to 2004, number of licenses allotted were 70. But after UPA-I came to power in 2004 it started the allocation spree. By 2012 the number of licenses allotted were 216.
But the catch here is, P.C Parakh, the Coal secretary in 2004, sensed this loss, so he recommended to the PM in 2004 to start the allocation process through auction.
But somehow, our then PM approved it a little late, and was sent to law ministry for the approval of recommendations, which took 2 years for the law ministry to give an answer.(deliberately may be).
In 2006, law ministry said- for the recommendations to be enacted, an amendment to MMRDA act has to be done. So, again there was a delay, it took 4 years for preparing the amendment. Finally it was prepared in 2010.
In 2010, an amendment was passed, but it was supposed to be gazetted, it took 2 more years for the Govt, meanwhile some more licenses were issued.
Govt thought nobody would find out, but as usual Mr. Subramanian Swamy sensed it and complained about it (Looks like he is having a good time)
CAG started auditing the coal blocks allocation in 2012, and Mr Vinod Rai gave his report. It stated that, it was done for windfall gains, technical feasibility was not examined, that there were certain idle coal blocks whose mining wasn’t done at all – leading to a great loss to exchequer. The licenses were allotted at peanut prices.
Thus Supreme Court took all this into account, and passed the judgement to cancel 214 of the 216 coal blocks.
For the record, the windfall gains to the allocatees is supposedly US $ 170 billion.