(EnergyAsia, October 21 2014, Tuesday) — The Indian government of Prime Minister Narendra Modi expects to soon begin auctioning off the mining and development licences for 214 coal blocks that were among 218 cancelled by the Supreme Court last month.

Speaking to the local media last week, Financial Services Secretary G.S. Sandhu said the five-month-old government will launch the auction over the next three months to help boost domestic coal supplies to power plants which account for more than 70% of India’s electricity output.

As part of his election platform, Mr Modi had promised to cancel and re-tender the licences for the development of India’s sizeable coal reserves ranked by BP as the world’s fifth largest.

Well-connected companies had secured the licences under different governments since 1993 but had done little or no work on their allotted coal blocks. Instead, the licensing system had become a cesspool for politicians and powerful businessmen to trade favours with their coal concessions. Starved of domestic supply as India’s electricity demand surged over the last two decades, power companies were forced to import the fuel at high cost that contributed heavily to the country’s trade and budget deficits.

The “coal-gate” scandal reached its climax in the summer of 2012 when power companies were unable to operate after depleting their coal stockpiles, causing India to suffer a world-record electricity cut-off to some 700 million people for three days. As India’s energy crisis worsened, businesses and citizens including the urban poor made a rare show of agreement by voting out the tainted 10-year-old government of Prime Minister Manmohan Singh.

The Modi government has targeted reform of the domestic coal industry as key to reviving the Indian economy, which began faltering under the weight of its self-made energy crisis since the turn of the decade.

While the need for reform is not in doubt, analysts and the government itself are unsure how to proceed as the same well-connected players could bid and re-secure the coal licences under different arrangements.

Furthermore, with coal prices at a multi-year low and heading lower, there is no guarantee that even new players would be tempted to develop the country’s deposits unless they receive generous state support and subsidies.

Mr Sandhu said the government has appointed a panel to provide ideas on how to reform the coal allocation system and solve the country’s power supply problems.

In September, India’s Supreme Court ruled that the licences to develop and mine 214 of the country’s 218 coal blocks had been awarded in an arbitrary manner, with suggestions of corruption and favours exchanged during the allocation process.

The Central Bureau of Investigation (CBI) has uncovered corrupt practices suggesting the involvement of some of the country’s leading politicians and businessmen, but none has yet been arrested and tried.