Devil is in the details for Coal India

CCI orders reworking of FSAs

Besides imposing a hefty penalty on Coal India (CIL) for abuse of its monopolistic position, the Competition Commission of India (CCI) has also directed the government-controlled mining giant to “incorporate suitable modifications in the fuel supply agreements”, ensuring “parity between old and new power producers, as well as between private and public sector power producers”.

 

Private companies such as Essar Power and Reliance Power stand to benefit.

“CIL, in abuse of its dominance, did not try to evolve/draft/finalise the terms and conditions of FSAs through a mutual bilateral process and the same were sought to be imposed upon the buyers without seeking, much less considering, the inputs of the power producers,” the 101-page order, issued on Monday, said.

CCI had slapped a Rs 1,773-crore penalty on CIL for alleged abuse of its monopolistic position. The order was issued on a complaint filed by the Maharashtra State Power Generation Company (MahaGenco).

The CCI bench also directed Coal India to consult all stakeholders for reworking the agreements. CIL has been given only 30 days from the date of receipt of this order to comply. The Rs 1,733-crore penalty is to be deposited within 60 days.

 

CIL, for a second day, stayed away from making any official comment on the matter. Their legal department is still studying the implications.

Chairman S Narsing Rao did not respond to text messages. Speaking to Business Standard,  a senior executive of CIL, however, said: “The new FSAs have accommodated some changes. But if we let go the order unchallenged, FSAs with private players need to be reworked.”

Though government-owned power companies were allowed arbitration in cases of dispute under the FSA and there were some relaxations on security deposit, private companies had accused Coal India of drafting the supply document for them in such a way that they were at a disadvantage.

Coal India has a total of 157 FSAs for power units built after April 2009, of a 72,145-Mw generation capacity. Although CIL did not give any break-up for public and private units, officials suggest about 30 per cent is for private entities. There are older agreements as well.

The official said it was difficult to change FSAs in 30 days. “Coal minister Sriprakash Jaiswal too had once said single FSA for PSUs and private coal consumers but that is surely not the case,” said a private power company official, who did not want to be named.

 

Quality has always remained an issue. In fact, during the investigation into MahaGenco's petition, CCI had written to all major coal consumers seeking information. NTPC had then expressed its views before the commission as "additional informants" along with West Bengal Power Development Corporation (WBPDCL) and DVC. WBPDCL too had filed a separate petition with CCI.

 

"We are very happy about the CCI order. In our petition, we had pointed out CIL does not provide any guarantee for supplying a certain quality of coal. There are transportation losses for which they do not take responsibility," a WBPDCL official said.