The Indian Supreme Court said this week it would reserve judgment on the cancellations until an unspecified later date, creating even more uncertainty around a final ruling.
Sushil Jacob, a Linklaters corporate managing associate, said India’s steel and power conglomerates had been looking for global coal assets in an attempt to deal with short supply even before the court ruled last month that all coal licences issued between 1993 and 2010 were approved without following the proper legal criteria.
If the court orders the wholesale cancellation, “the government says they’ll move quickly with a [re-]auction, but it will be under a microscope given what happened previously”, Jacob said.
“How ‘quickly is quickly’ is the question, and in the meantime those power plants and steel plants will be looking to short-term or long-term solutions offshore.”
Jacob predicted the court would make a decision close to the last day of September, the last day of Rajendra Mal Lodha’s term as chief justice.
“Knowing past chief justices of India, they’re likely to pass the judgment on the day they retire in a blaze of glory,” he said.
If the government opts for cancellation, he believes it will do so for the licences for all 218 coal blocks and not exempt the 41 blocks already being operated or close to being operated, as the government has requested.
“Whether people have deferred costs or developed an asset isn’t really something on which the Supreme Court should base its view,” Jacob said, pointing to the precedent set in a 2012 rulings on the mobile telephone market.
Back then, the court ordered that 122 telecoms licences be revoked, and government auditors later estimated the scandal cost the country $US40 billion.
The coal and telecoms scandals and this latest court delay have all done nothing to assuage investor concerns about doing business in India.
“Any delay leads to speculation,” Jacob said. “Why did they need to delay and what are they trying to achieve with the delay?”
“You [the court] have said it’s illegal, so why haven’t you gone ahead and cancelled it? What are you waiting for? And where are you going to come out on this? This is just leaving everyone in the lurch.”
