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    would threaten to derail Modi’s plans to revive economic growth

    August 27, 2014

    Court Verdict on Coal Permits may derail Modi's Pledge to revive growth,

    The Indian Supreme Court verdict that declared coal-mine allocations over the last two decades illegal threatens $47 billion of industrial projects and Prime Minister Narendra Modi’s pledge to revive growth, agency reports from Mumbai said.

    The court’s Aug. 25 judgment raises the possibility of permit cancellations, after it ruled the allocations were “arbitrary and illegal.” To mitigate the risk to the economy, the court could instead impose financial penalties on mine operators or establish an auction process that would allow mines to keep running while ownership issues are settled. The court will hold a hearing on the consequences of its ruling on Sept. 1.

     

    Canceling the permits outright would roil the nation’s power industry, adding to fuel shortages and blackouts and hurting industrial output. Power plants, cement and aluminum factories would have to buy coal from abroad, adding $3 billion to the nation’s import bill, according to Rakesh Arora, an analyst at Macquarie Capital Securities India Pvt., in a report. That would threaten to derail Modi’s plans to revive economic growth, close to the weakest in a decade when he came to power in May with the biggest mandate in 30 years.

     

    “In the worst case scenario, all mines will be canceled, power plants and other factories would stop getting coal from these mines and bank loans to those projects will be stuck,” said Rajiv Kumar, a senior fellow at the Centre for Policy Research. “That will be economic chaos.”

     

    Coal’s importance to the economy -- it fires more than 60 percent of the nation’s electricity-generation capacity -- suggests the court may seek an alternative route to redressing the illegal allocation of mines.(KH)

     

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