In one of the rare instances of reducing the penalty by half, the Competition Commission of India (CCI) ordered final penalty of Rs 591 crore on state-owned Coal India Limited (CIL) for abusing its dominant market position. The competition watchdog however has come down heavily on public sector giant for using its monopolistic position in unilaterally in finalising the ‘Fuel Supply Agreements (FSAs)’ with power producers.
The order pertains to case filed by Maharashtra State Power Generation Company Ltd (Mahagenco) and Gujarat State Electricity Corporation Limited (GSECL) in 2013 against CIL and its subsidiaries - South Eastern Coalfields Ltd, Western Coalfields Ltd. and Mahanadi Coalfields Ltd.
Former executives with the petitioner power companies said the amount is not paramount but the principles upheld by the Commission are. “The country has paid heavy price due to the unfair practises of Coal India which has led to increase in the power price, eventually paid by the consumers. The case Order should now lead to Coal India taking up reform measures, as pointed out by the honourable Commission,” a former executive official told Business Standard requesting anonymity.
Officials in Coal India said they are studying the Order. “CIL is aware of the order and we would take appropriate step at appropriate forum and time,” a senior CIL official told the paper.
The power companies had alleged that instead of signing/ executing coal supply agreements/ fuel supply agreements, (the coal supplier) executed/ signed MoUs which did not cover all aspects of supply and issues. Aspects like quality control, grade failure, short supply, joint sampling etc., had not been detailed/ enumerated in clear terms and conditions, they said.
In December 2013, the CCI passed its first ruling, passed in December 2013, imposing a penalty of Rs 1773 crore. This was set aside by the Competition Appellate Tribunal (Compat) and asked the regulator to take a fresh look at the allegations. On Friday, CCI reduced the penalty to Rs 591 crore on CIL and its subsidiaries.
The state owned power companies had alleged clauses of coal supply agreement with CIL & its subsidiaries demonstrated that 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 Section 4(2)(a) (i) of the Act. The Section of the Competition Act pertains to the unfair or discriminatory condition in purchase or sale of goods or services and unfair or discriminatory price.
The submission made by Mahagenco & GSECL said instead of signing/ executing coal supply agreements/ fuel supply agreements as required under the new Coal Distribution Policy, 2007, (the coal supplier) executed/ signed MoUs which did not cover all aspects of supply and issues.
Aspects like quality control, grade failure, short supply, joint sampling etc., had not been detailed/ enumerated in clear terms and conditions,” it said
The CCI in its latest Order directed CIL to incorporate suitable modifications in the fuel supply agreements to provide for a fair and equitable sampling and testing procedure. “CIL may also consider the feasibility of sampling at the unloading-end in consultation with power producers besides adopting international best practices,” said the Order.
