India's Supreme Court canceled most of the coal-mining licenses issued since 1993. Pictured, laborers load coal into trucks at an open-pit coal mine in Jharkhand, India's Bestacolla Colliery. Bloomberg News

NEW DELHI—India's Supreme Court canceled hundreds of coal-mining licenses, adding uncertainty beyond the struggling coal industry to the heart of Asia's third-largest economy.

The country's highest court on Wednesday said control over almost all coal blocks allotted since 1993 will have to be returned, saying they were granted illegally. The decision could aggravate a coal shortage in the country, analysts said.

The cancellation puts at least $47 billion of investments in such industries as power, steel and aluminum at risk, said Ashok Khurana, director general at the Association of Power Producers. "It does create uncertainty in the mind of an investor," he said. "He will think that even after 10,15 or 20 years, a court may strike down the policy on which he [based] his investment decision."

Ajay Bhatt, the chief financial officer of Monnet Ispat & Energy Ltd. 513446.BY -6.52%said his company has invested close to $2 billion in building steel and power plants in last five years with the assumption it would have a stable supply of coal from blocks it had been allotted. "Who will compensate me?" he asked. "I have paid taxes, paid royalty and dividends. There is huge shadow of uncertainty."

The cancellations followed a ruling by the court last month that issuance of the licenses was arbitrary and nontransparent. India's federal auditor in 2012 said the government lost as much as 1.86 trillion rupees ($30 billion) in potential revenue because it granted the licenses without competitive bidding.

The Supreme Court on Wednesday canceled 214 of the 218 coal-block licenses issued since 1993. The decision took effect immediately for the 172 mines that weren't in production.

The cancellation will take effect in six months for 42 blocks that had begun production, to ensure that coal supplies aren't affected as the government decides what to do with the licenses. It is likely that some will be auctioned while others will remain with state-owned or state-run companies, analysts said. The few companies that were producing coal from the blocks will have to pay 295 rupees ($4.83) a ton for the coal that they have extracted.

The four licenses spared were for two blocks granted to Reliance Power Ltd.532939.BY +2.65% for a large power project and one each granted to NTPC Ltd.532555.BY +0.80% and Steel Authority of India Ltd. 500113.BY -1.46%

While only around 7% of the mines covered by the licenses are producing coal, there are billions of dollars of investment riding on their future.

"Our main concern is on the kind of negative impact on the economy, which has just been showing signs of recovery after over two years of slowdown," said Rana Kapoor, president of the Associated Chambers of Commerce and Industry. Before the ruling, the industry group said cancellation could shake the confidence of domestic and foreign investors and lead to huge losses and loan defaults.

As companies have waited to learn the fate of the coal-mining rights, India has faced a severe coal crunch. The country needs to produce more coal if it wants economic growth to reach 10% again, economists have said.

Around 70% of India's electricity is generated by burning coal. The country is the world's third-largest producer of coal, behind China and the U.S. Yet it relies heavily on imports because of mismanagement and an onerous bureaucracy in coal exploration, production and power generation. As a result, nearly a quarter of India's 1.2 billion people have no electricity, according to the World Bank.

The coal-license scandal contributed to perceptions that the previous government, led by the Congress Party, was driven more by the interests of political cronies than the public. The Bharatiya Janata Party made graft allegations into an effective campaign issue in the spring elections. It won its first majority in Parliament and its leader, Narendra Modi, became prime minister.