Competition Commission slaps Rs 1,773 cr fine on Coal India for unfair ways

PTI
Published Dec 11, 2013, 3:54 am IST
Updated Mar 18, 2019, 11:17 pm IST
First major penalty on a state-owned firm by the watchdog for abusing its dominant position in fuel supplies.

New Delhi: Competition Commission has slapped a fine of Rs 1,773 crore on Coal India, the first major penalty on a state-owned company by the fair trade watchdog, for abusing its dominant position in fuel supplies.

Touching upon a host of issues related to coal supplies, including sampling and testing procedures, the regulator also ordered Coal India to modify the fuel supply agreements (FSAs) after consulting stakeholders.

 

The Competition Commission of India (CCI), in its order on December 9, said that Coal India is operating independently of market forces and enjoys an undisputed dominance in the country for production and supply of non-coking coal.

The fair trade regulator has also directed the company to cease and desist from anti-competitive practices.

The order came on complaints filed by Maharashtra State Power Generation Company and Gujarat State Electricity Corp against Coal India and three subsidiaries- Mahanadi Coalfields, Western Coalfields and South Eastern Coalfields.

 

The quantum of penalty- Rs 1,773.05 crore is equal to three per cent of the PSU's average turnover for the last three years. When contacted, a Coal India spokesperson declined to comment. However, a company source said: "The company will respond after seeing the order. Further course will be decided then."

The ruling assumes significance since in recent times, Coal India has drawn flak for fuel shortages that have been hurting the country's power generation.

According to the CCI order, Coal India abused its dominance and did not try to evolve/draft/finalise terms and conditions of FSAs through a mutual bilateral process. " the same were sought to be imposed upon the buyers without seeking, much less considering, the inputs of the power producers," the CCI said.

 

The Commission said that Coal India was "imposing unfair/discriminatory conditions in FSAs with power producers" that violate fair trade norms. Besides, the CCI has directed Coal India to ensure parity between old and new power producers as well as between private and public sector power producers, "as far as practicable".

In deciding on dominance, the CCI took into consideration various factors including that the company's conduct is "affected and constrained by directions received from various stakeholders" including Coal and Power Ministries.

 

However, the Commission also said that despite overarching policy and regulatory environment Coal India has sufficient flexibility and functional independence in carrying out its commercial and contractual affairs.

The Director General (DG)- the Commission's investigation arm began probe into the case last year.

Observing that the country barely mines 540 million tonnes of coal annually whereas the reserves are over 250 billion tonnes, the CCI said "effects of various anti-competitive factors identified in the coal sector on the rest of the economy are widespread and create systemic risk".

 

Emphasising the need to carry forward coal sector reforms, the Commission said that more number of players should be allowed.

"Bringing the coal sector under the independent regulatory oversight would only help if there are enough players in the market," it added.

Maharashtra State Power Generation Company's Managing Director Asheesh Sharma that he did not have exact details of the CCI order.

"It was a long pending order. We had given the evidences. As it stands, we are satisfied but how much we are satisfied we will be able to comment only after we see the detailed order," Sharma told PTI. 

 

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