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Entertaining JSPL plea to affect coal block auction: Govt to HC

Govermment on Tuesday opposed in Delhi High Court the pleas of JSPL and its promoter Naveen Jindal challenging its order changing end-use of coal blocks earlier alloted to them, saying the decision was taken to ensure optimal use of reserves of the natural resource.

New Delhi: Govermment on Tuesday opposed in Delhi High Court the pleas of JSPL and its promoter Naveen Jindal challenging its order changing end-use of coal blocks earlier alloted to them, saying the decision was taken to ensure optimal use of reserves of the natural resource.

"Entertaining the plea will result in stunting the entire process undertaken subsequent to apex court verdict," Attorney General Mukul Rohatgi submitted before a bench of justices B D Ahmed and Sanjeev Sachdeva.

The AG contended that the Supreme Court while cancelling the coal blocks had made it clear that there cannot be any link with the past.

Hence, Jindal Steel and Power Ltd's (JSPL) contention, that change of end-use would affect its Rs 20,000 crore investment in a steel unit, is "wiped out", he said.

The Centre was responding to the petition in which JSPL contended that it was allocated coal blocks in Odisha and Chhattisgarh for the setting up steel and sponge iron production units respectively, and changing the end-use has resulted in making it ineligible to participate in the ongoing auction process which is expected to culminate on February 14.

Rohatgi made it clear that while cancelling the coal blocks, the apex court had said not to look at prior allocation or the investment made on the same as the process of allocation was "fundamentally flawed, illegal and arbitrary".

Senior advocate Kapil Sibal, appearing for the JSPL and Jindal, opposed the submissions, saying the aspect of auction of coal blocks was never contemplated by the apex court.

"Auction was never contemplated by the apex court as the point was never put before it. The government had contended that Coal India Ltd (CIL) will fill the void and take things forward," Sibal said.

The AG said the decision to change end-use as well as merge some coal blocks, as was done in the case of Utkal B1 and B2 in Odisha (allotted to JSPL), was taken on the basis of the recommendations of a high powered committee.

Rohatgi said one of the members of the panel was from Central Mines Planning and Design Institute Ltd (CMPDIL), a premier body for coal exploration and mining.

He also said that the government's Coal Ordinance of 2014 was a direct fallout of the apex court verdict.

The AG said the priority to power sector was given to comply with the ordinance's mandate to carry out auction in public interest, in a transparent manner and for optimal utilisation of the coal reserves.

"So areas having over 100 million tonnes of low grade coal were earmarked for power as this sector requires low grade coal in huge volumes while iron and steel requires high grade coal in low volumes," he said.

Utkal B1 and B2, subject matter of the petition by JSPL, in Odisha had 228 and 114 million tonnes of low grade coal, respectively, and the area between them had 35 million tonne coal reserves. Thus it was decided to merge the two blocks to get around 377 million tonnes of coal, he said.

Gare Palma IV/6 in Chhattisgarh, also subject matter of the pleas, has 158 million tonnes of low grade coal reserves, the AG said, adding that change of end-use was predominantly in public interest as well as keeping in view the grade and quality of coal of a block.

On the other hand, Sibal contended that changing of end- use of the coal blocks by giving priority to power sector does not arise from the Ordinance or from any government policy.

"Recommendations of a committee is not the policy of the Government," Sibal said, adding that the Steel Ministry had also objected to the change of end-use from steel and sponge iron to power.

He said if power was a priority in public interest, then there were other sources, hydel, wind, nuclear and solar, which could be explored.

"All their arguments are in retrospect to save their order (of December 18, 2014)," he said and sought that the records be called for to ascertain the facts.

"If need be, we will call for the files," the bench said and listed the matter for further arguments on Thursday.

During the day's proceedings, the AG also stressed the urgent need to complete the auction process as the apex court had allowed the operational mines, 42 in number, to continue till March 31, 2015, while cancelling their allocation.

JSPL can bid for Utkal B1 and B2 as well as Gare Palma IV/6 for power as it is big in power as well, he said.

The Attorney General also said, "Power is in short supply in the country. We are short by more than 10000 mega watts. It is critical and is required for everything. So it is in larger public interest to give priority to power.

"Also, as it happens most coal resources in the country are of inferior quality, which is good for power generation."

Maintaining that requirement of cement and steel was cyclical though it was not so for power, he said while the change of end-use may benefit some, it may not others.

"We can't look at every individual case. 100 kilometers here or there cannot invalidate a decision or law.

... A decision cannot be tested on that it will cost a bit extra to get coal from another block situated at some distance from the plant," he said, adding "compromises have to be made (as) no one can please absolutely everybody."

Maintaining that the mode of auction for steel and power was different, he said "for power it is inverse auction", explaining that under this method. "Lower the bid, the better it is for the public who will benefit from the low cost of power production," Rohatgi said.

Sibal, meanwhile, argued that the government decision was "specific to Jindal".

"Our need is 230 million tonnes. We won't get that even if we bid and win six other blocks," he said, adding that the other blocks too had low grade coal as India has minimal sources of coking coal which is optimum for steel production.

"Steel industry is in the dumps as coking coal has to be imported for billions of dollars," he said.

He also questioned how many transportation lines should the company run from the various blocks to its steel unit.

JSPL, in its plea had contended that it has set up steel and sponge iron units in Odisha and Chhattisgarh for over Rs 24,000 crore.