Coal block allocations since 1993 illegal: Supreme Court
The Supreme Court held that the allocation of coal blocks by the Central Government since 1993 lacked a fair and transparent procedure and was arbitrary and illegal
The Bench found that the Screening Committee mechanism used to allocate blocks operated in an ad hoc and casual manner across successive allocations, resulting in an unfair distribution of a scarce national resource
The Court subsequently cancelled the majority of the allocations made during this period, directing that reallocation follow a transparent, competitive process
A small number of allocations tied to ongoing power and public-sector projects were permitted to continue, subject to conditions, to avoid disruption to end-use sectors
Coal Nationalisation and the Screening Committee Route
Coal mining in India was nationalised in two stages, after which private allocation of coal blocks for "captive" use (by companies for their own power, steel, or cement production) was permitted through an administrative Screening Committee mechanism rather than competitive bidding — the very mechanism the Court found deficient.
Key Details
- The Coal Mines (Nationalisation) Act, 1973 vested the right to mine coal exclusively in the Central Government or its specified public sector undertakings, ending private commercial coal mining
- An amendment to the Act in 1993 created an exception allowing captive mining by private companies in the power, steel, cement, and washing sectors, which required allocation through a "Screening Committee" — an administrative body, not a statutory auction mechanism
- Between 1993 and 2010-11, 36 Screening Committee meetings and additional allocations through the "Government dispensation" route resulted in 218 coal blocks being allocated without a competitive, transparent bidding process
- The Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) is the parent legislation governing mineral (including coal) exploration and mining leases in India, and questions of procedural fairness in resource allocation are tested against its framework
The Court's finding of illegality rests squarely on the informal, discretion-heavy Screening Committee process used under the 1993 amendment to the Nationalisation Act — a process with no statutory criteria, scoring mechanism, or competitive element.
Natural Resource Allocation and Article 39(b) of the Constitution
Article 39(b), a Directive Principle of State Policy, directs the State to ensure that the ownership and control of material resources of the community are distributed to best subserve the common good — a principle invoked in judicial reasoning on the allocation of scarce public resources such as spectrum, coal, and minerals.
Key Details
- Article 39(b) falls under Part IV (Directive Principles of State Policy) and is not directly enforceable in court but has been used to inform judicial interpretation of resource allocation disputes
- In the 2012 Presidential Reference on 2G spectrum allocation (following the earlier Centre for PIL v. Union of India judgment on cancellation of 2G licences), the Supreme Court clarified that auction is not the sole constitutionally mandated method for allocating natural resources, but the method chosen must be fair, transparent, and non-arbitrary, satisfying Article 14
- The coal block allocation case applied a similar standard — the issue was not that non-auction allocation is inherently unconstitutional, but that the specific Screening Committee process lacked transparency and fair criteria
The judgment reinforced the principle that any non-auction method of allocating a natural resource like coal must still meet the tests of fairness and non-arbitrariness under Article 14, read with the common-good mandate of Article 39(b).
Coal Mines (Special Provisions) Act, 2015 — The Statutory Response
Following the cancellation of allocations, Parliament enacted a dedicated law to enable swift, transparent reallocation of the cancelled coal blocks through competitive e-auction, replacing the discretionary Screening Committee route with a statutory bidding mechanism.
Key Details
- The Coal Mines (Special Provisions) Act, 2015 was enacted to allow reallocation of the cancelled blocks via auction or allotment, and to provide compensation to prior allottees for land and infrastructure already developed
- Cancelled mines were classified as "Schedule I" coal mines; among these, mines that were already producing or ready to produce coal were further classified as "Schedule II" mines, with auctions for Schedule II and III mines restricted to specified end-use sectors such as power, steel, and cement
- The Act empowers the Central Government to appoint a "Nominated Authority" (an officer of at least Joint Secretary rank) to conduct the auction and manage the vesting and transfer of mining rights to successful bidders
- This reform fed into the broader shift toward competitive, price-discovery-based allocation of natural resources in India, paralleling similar auction-based reforms in spectrum and mineral block allocation
The 2015 Act is the direct legislative consequence of the illegality finding — it operationalised a transparent auction framework to replace the very Screening Committee process the Court struck down.
- Coal Mines (Nationalisation) Act enacted: 1973; amended in 1993 to permit captive mining allocation
- Coal blocks allocated via Screening Committee/Government dispensation routes (1993 to 2010-11): 218
- Coal block allocations subsequently cancelled: 214 of 218 (a small number tied to power/public-sector end-use were allowed to continue)
- Petitioners in the case: Common Cause and advocate Manohar Lal Sharma (PILs)
- Statutory response enacting auction-based reallocation: Coal Mines (Special Provisions) Act, 2015
- Parent mining legislation: Mines and Minerals (Development and Regulation) Act, 1957
- Related constitutional principle: Article 39(b) (Directive Principles) on distribution of material resources for common good, tested against Article 14's fairness requirement