Corporate Lawyer On De-allocation Of Coal Blocks And Its Impact On Power Sector

by Abhinav K. SEO | SMO | SEM | Web Promotioner
In the latest verdict by the Supreme Court of India, 194 coal blocks allocated between 1993 and 2009 by the government were classed as "arbitrary and illegal". People have mixed opinion about the court's verdict, many believes that it will bring about transparency in the sector. "In case the SC decides to cancel the allocations, the upside would be that there would be more coal block available to be bid out through a transparent auction."- P. Uma Shankar, former power secretary.

During 90's and in the past decade the government persuaded private companies for coal blocks and awarded easily to increase private participation. Eventually, private companies invested heavily for coal and power generation. "Now, private players are confused and shocked as they have already invested almost Rs. 2,86,677 crore in total. It is really a big concern that country derives almost 60 per cent of electricity from thermal power plants and harsh rules can lead the country towards power shortage in the short run." - Kislay Pandey, Corporate Lawyer, the Supreme Court of India. Reacting on the SC'S declaration, Essar Energy CEO Sushil Maroo commented, "The sector is in an uncomfortable position now that the SC has called these allocations illegal. It will hurt investment sentiment for some time."

Besides, if the SC cancels the existing allocations, it will add-on burden on Coal India to cope the requirements of energy and power sectors. "In case SC cancels the allocations, power sector would have to tap for alternate sources dearer than the present coal price in the market. Energy producers will compromise with the profit margins or they can also raise the price of output to compensate with rising production cost. "The judgement deepens the power sector crisis further. Immediate remedial steps are required to be put in place by the government to mitigate the adverse implications of the judgement, i.e., the expected fall of output from these mines. If these steps are not taken, the coal deficit situation will worsen further."- Ashok Khurana, Director General of The Association of Independent Power Producers.

Economists and business analysts foresee that the government may go for some kind of a compromise in order to cope with the negative impact on industries that depend on coal. "Supreme Court has not de-allocated coal blocks yet, the apex court will decide about it on September 01 that de-allocation is required or not or it will penalise the private companies by levying some monetary penalties. We have to wait till September 01 for the final verdict." - Kislay Pandey, Corporate Lawyer, the Supreme Court of India.

About Abhinav K. Magnate I     SEO | SMO | SEM | Web Promotioner

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