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INTRODUCTION:
Coal allocation scam or Coalgate, as referred by the media, is a
political scandal concerning the Indian government's allocation of the
nation's coal deposits to public sector entities (PSEs) and private
companies by former Prime Minister Manmohan Singh.
The Indian government had illegally allocated 218 coal mines to both
Public and Private sector industries. The allocations are termed as illegal
because they were not done on the basis of a competitive bidding. Due to
this the companies had to pay less than what was expected of them.
In a draft report issued in March 2012, the Comptroller and Auditor
General of India (CAG) office accused the Government of India of
allocating coal blocks in an inefficient manner during the period 2004
2009.
CURRENT STATUS:
The Supreme Court on Monday declared allocation of all the 218 coal
blocks made since 1993 as illegal and arbitrary while also holding that
the central government had no power of allocation under the relevant
laws
The Apex court slammed the allocation of the coal blocks, saying
allocations were made in casual manner without doing any comparative
assessment of applicants
They were done in an unfair, arbitrary & non transparent manner without
following any objective criteria
ALLOCATIONS:
Out of 218 coal blocks
Power sector accounted for 95 blocks or 44%
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Another effect of the coal block cancellation will be that the burden on Coal
India for supply of coal will increase.
Since there will be scarcity of coal, for immediate help the needy sectors will
turn to Coal India for supply of coal. This will increase the burden on Coal
India.
STOCK PRICES WILL FALL:
One of the very obvious impact of the scam will be that the stock prices of
the companies involved will fall. There was a sell off of the metal stocks after
the SC verdict was announced.
Many stocks like JSPL, Hindalco, etc. were affected as their prices fell a great
deal.
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Government had earlier allowed the company to divert surplus coal used in
Sasan UMPP.
Although after the ruling, the diversion of coal from UMPP coal mine is
disallowed.
The coal crisis has affected public sector lenders that have lent to iron
and steel companies after the Supreme Court on Monday deemed coal
blocks post-1993 illegal.
Even the stocks of PSU banks slipped due to their exposure to coal
mines. State Bank of India was trading down 18 points at Rs 2487.55
on 26 Aug. 2014
Shares of PFC were trading over 4.5 percent down at Rs 245.50 and
REC was down over 3.5 percent at Rs 259.10 in early trade.
This will also lead to the argument to affected companies why the
block must not be de-allocated.
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Even on the usage of coal, the SC has not ordered anything on whether
the companies should continue using coal from the illegal blocks.
REMEDIES:
whoever
offers
the
highest
lease
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