Competition watchdog slaps Rs 1,800-cr fine on CIL

Order based on Mahagenco's petition over abuse of market position by coal miner

The Competition Commission of India (CCI) has slapped Coal India Ltd (CIL) with a penalty of Rs 1,773 crore — the biggest by the watchdog on a company — over alleged abuse of its monopolistic position. The fine comes to roughly three per cent of the Kolkata-headquartered Maharatna company’s average turnover in the past three years

The order was issued on a complaint filed by Maharashtra State Power Generation Company (Mahagenco), which had said the mining entity’s alleged misconduct could be “established” at two levels. One, at the time of executing a contract for coal supply; and two, while implementing the terms of any contract and effecting supply to a beneficiary. The state-owned power generating company, India’s second-largest, had made CIL and its subsidiary, Western Coalfields Ltd (WCL), respondents in the petition.

A spokesperson for CIL said the company had yet to get a copy of the order, while a senior executive said the miner would challenge the order. “It is the order of a trial bench. We will go to the appellate tribunal and, if needed, the Supreme Court. We are confident we have a strong case,” he said. The CIL board is likely to discuss the matter at its next meeting, possibly in the next few days.

“In our petition, we have submitted that CIL’s abuse of dominant position takes place when coal companies become reckless and consistently supply inferior-quality coal to the detriment of purchasers,” Mahagenco Managing Director Subrat Ratho had said, when the petition was filed. The fuel supply agreement (FSA) does not protect a purchaser on the issue of poor quality of coal.

As much as 102,863.38 Mw of electricity generated in the country is based on coal, according to Ratho.

“This is 84 per cent of the country’s total generation capacity,” he added. Mahagenco produces 63.4 per cent of the total amount of electricity generated in Maharashtra. The power producer argues it is not any commercial activity that has helped the country’s top coal companies vest a dominant position in the market. “Rather,” Ratho claimed, “they have acquired it by the virtue of a statutory scheme and the policy of the (Union) government”.

Mahagenco wanted CCI to examine whether the country’s dominant coal companies were abusing their position, and whether the power generators had a resultant prejudice in favour of entities like CIL and WCL.

“The contracts under which coal is supplied has to be examined to protect the interest of power generators and consumers,” Ratho had said. According to the Mahagenco petition, CIL and WCL, both founded in 1975, have “abused their dominant position” to make huge profits at the cost of electricity consumers.