CCI reduces penalty on Coal India by half on 'unfair' coal supply

The Competition Commission of India (CCI) has come down heavily on state-owned Coal India Ltd (CIL) for allegedly abusing its dominant market position, even as the watchdog reduced the penalty on the company by two-thirds to Rs 591 crore. CCI criticised the public sector giant for supposedly using its monopolistic position in unilaterally finalising “fuel supply agreements (FSAs)” with power producers.

In December 2013, CCI passed its first ruling, imposing a penalty of Rs 1,773 crore. The Competition Appellate Tribunal (Compat) set it aside and asked the regulator to take a fresh look at the allegations against CIL.

The order pertains to cases filed by Maharashtra State Power Generation Company and Gujarat State Electricity Corporation in 2013 against CIL and its subsidiaries — South Eastern Coalfields, Western Coalfields and Mahanadi Coalfields. Former executives of the petitioner power companies said the amount was not paramount but the principles upheld by the Commission were. “The country has paid a heavy price due to the unfair practices of Coal India. Those have led to increase in the power prices, eventually paid by the consumers. The case order should now lead to Coal India taking up reform measures, as pointed out by the Commission,” a former executive told Business Standard requesting anonymity.

Executives of Coal India said they were studying the order. “CIL is aware of the order and we would take appropriate steps at an appropriate forum and time,” a senior executive told Business Standard.

The power companies had alleged that instead of executing the fuel supply deals, (the coal supplier) signed and executed MoUs (memoranda of understanding) that did not cover all aspects of supply and other issues. Aspects such as quality control, grade failure, short supply and joint sampling had not been detailed and enumerated in clear terms and conditions, they said.

The power companies had alleged clauses of coal supply agreements with CIL and its subsidiaries demonstrated the conditions of supply as proposed were onerous and failed the purpose of securing assured coal supply and the committed grade of coal.

The regulator in its order on Friday asked CIL to modify its FSAs and also ensure that “uniformity between old and new power producers as well as between private and PSU power producers”.

The CCI observed CIL imposed unfair and discriminatory terms and conditions in contravention of the provisions of the Competition Act.