* Court says final decision on the blocks to be taken next
* Coal minister says final decision would be in interest of
* Jindal Steel, Hindalco shares plunge after court decision
(Adds court judgment quote, minister's comment)
By Suchitra Mohanty and Krishna N Das
NEW DELHI, Aug 25 India's top court on Monday
declared as illegal government allocations of coal blocks since
1993, jeopardising projects built around the blocks and
threatening to exacerbate a shortage of the fuel.
The government's awards of more than 200 coal blocks to
steel, cement and power companies has been at the centre of a
scandal Indian media has dubbed "Coalgate", with an auditor
report in 2012 saying the underpriced sales had cost the
exchequer as much as $33 billion.
The ruling sent the shares of Jindal Steel and Power Ltd
, Hindalco Industries Ltd and Sesa Sterlite
Ltd down by more than 10 percent. The firms have spent
billions of dollars on steel and power plants based around the
The court said it will hold a further hearing on Sept. 1,
after which it will decide whether to cancel the allocations or
impose some sort of penalty.
Power and Coal Minister Piyush Goyal said a final decision
from the court would be in the interest of the country.
"I would look forward to finality in the matter of coal
block allocations which have for several years now kept the
sector in limbo and with the finality that one can expect very
soon, I hope the sector can start progressing," Goyal told
The uncertainty surrounding the allocations has made it
difficult for firms to develop the coal. Dipesh Dipu, partner
with Jenissi Management Consultants, said only 30 of the around
200 blocks are operational with annual capacity of about 40
Accusations of crony capitalism in allocating India's
resources from coal to mobile telephone bandwidth had dogged the
former government of Manmohan Singh. His Congress party suffered
its worst defeat in polls concluded about three months ago.
The court has taken similar action against illegal iron ore
mining over the past three years that have crippled the sector.
Any mass cancellation of the coal blocks will add to a
shortage of coal for power plants. More than two-thirds of
India's electricity is generated by the fuel.
India produced 565 million tonnes of coal in the fiscal year
to March 31.
P.C. Parakh, a former top bureaucrat in the Coal Ministry,
said the blocks can not be cancelled wholesale.
"A coal mine takes in our country anywhere between eight to
10 years to start operating. We are already in serious shortage
of coal in the country," Parakh told CNBC TV18 channel.
India is the world's third largest importer of coal as state
monopoly Coal India Ltd has struggled to raise output
fast enough to meet rising demand.
"If these coal blocks are cancelled we will be at least five
years behind in terms of production of coal, which can have
serious implications for our power sector," Parakh said.
LOST TO EXCHEQUER
Earlier in the day, the Central Bureau of Investigation said
that it was likely to close a coal scam case against billionaire
Kumar Mangalam Birla and Parakh that surfaced after the 2012
The CBI is likely to file a closure report on the case
against Birla and Parakh very soon, CBI spokeswoman Kanchan
Prasad told Reuters.
"Obviously if a closure report is being filed there's no
criminality (on the part of Birla and Parakh)," she said.
The CBI filed the case against Birla and Parakh late last
year in relation to a block allocated in 2005 to Hindalco, part
of the $40 billion Aditya Birla Group. Kumar Mangalam Birla is
the chairman of the group.
The case had sparked widespread condemnation from industry
leaders and politicians alike given Birla's stature as a leading
Hindalco had denied any wrongdoing and even the then Prime
Singh, who was in charge of the coal ministry when the
allocation took place, defended the decision to award the block
Hindalco shares closed down about 10 percent while Jindal
shares ended down 14 percent in a wider Mumbai market
that was up slightly.
(Editing by Himani Sarkar and Michael Urquhart)