The Coal Block Allocation Scandal

How coal blocks were allocated without competitive bidding for years, how auditors estimated huge losses, and how the Supreme Court cancelled allocations in 2014.

For years, India allocated coal blocks to companies through a screening committee, not through open auctions. The process became one of India’s biggest controversies.

How blocks were allocated

Between 1993 and 2010, the government allotted over 200 coal blocks to private and public companies for captive use, such as for power and steel plants, based on applications reviewed by committees.

The auditor’s report

In 2012, the Comptroller and Auditor General (CAG) estimated that allocating blocks without competitive bidding caused a notional loss to the exchequer of about 1.86 lakh crore rupees, the gain to companies from getting coal cheaply. The estimate was debated, but it sparked a political storm, often called “Coalgate”.

The Supreme Court

In 2014, the Supreme Court declared allocations since 1993 illegal and cancelled 204 coal blocks, finding the process arbitrary and non-transparent.

Consequences

Companies lost blocks and investments.
Banks faced losses on loans to affected projects.
The government moved to auctions.

The lesson

Natural resources belong to the public. Allocating them without competitive, transparent processes risks favouritism and lost revenue. The Supreme Court’s earlier 2G spectrum judgment in 2012 had made a similar point about spectrum.

Economic debate

Some argued that the aim of allocations was to boost power and steel, not maximise revenue. Others argued transparent auctions could achieve both.

The cheap coal

A company receives a coal block without bidding and gets coal far below market value. Critics argue the public, which owns the coal, lost out; a competitive auction would have captured more value.

Thinking the CAG's figure was cash stolen

It was an estimated notional loss from not auctioning, not cash taken from the treasury.

Key takeaways

Over 200 coal blocks were allocated without auctions between 1993 and 2010.
The CAG estimated a notional loss of about 1.86 lakh crore rupees in 2012.
The Supreme Court cancelled 204 blocks in 2014.
The episode led to auction-based allocation.