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India's Coal Conundrum

A Supreme Court ruling on coal licenses has the potential to rock some of India's biggest industries. But judges can't fix India's real energy problem.
Hundreds of private coal licenses could be revoked.
Hundreds of private coal licenses could be revoked.

India's struggling industrial sector suffered quite the shock Monday, when the country's Supreme Court ruled that the allocation of hundreds of coal mines to private companies from 1993 to 2010 had been illegal. If judges decide to cancel those licenses on Sept. 1, when they are set to issue a follow-up ruling, they could deal a "death blow to confidence" in sectors such as steel and power. What they can't do is fix India's energy mess.

The court's decision shouldn't have come as a surprise. The process by which the government doled out so-called captive mines -- which companies could use to produce energy for their own facilities, but not sell on the open market -- was completely discretionary and arbitrary. Bureaucrats picked the well-connected winners one-by-one, rather than through an open bidding process. Officials rarely advertised for applications, and didn't lay down any clear or transparent criteria for selection. Even if no money changed hands, there's no way to prove the deals were aboveboard. The screening committee did not record minutes of its meetings.