The fair trade regulator Competition Commission of India (CCI) has imposed a penalty of Rs 591.01 crore upon Coal India Limited (CIL) after finding that CIL and its subsidiaries violated the Competition Act by imposing unfair/ discriminatory conditions in Fuel Supply Agreements (FSAs) with the power producers for supply of non-coking coal.
Apart from ordering CIL and its subsidiaries to “cease and desist” from anti-competitive practices, the CCI also directed modification of the FSAs, a government statement said. For effecting the modifications in FSAs, CIL has been ordered to consult all the stakeholders, it said, adding that CIL has also been directed to ensure uniformity between old and new power producers as well as between private and PSU power producers.
The 56-page Final Order has been passed today on a batch of informations filed by Maharashtra State Power Generation Company and Gujarat State Electricity Corporation against CIL and its subsidiaries (Mahanadi Coalfields, Western Coalfields and South Eastern Coalfields). The CCI order follows the Competition Appellate Tribunal remanding the matter back while setting aside the original order of the CCI in which a penalty of Rs. 1773.05 crore was imposed upon CIL.
After hearing the parties afresh in terms of the directions issued by Competition Appellate Tribunal, the CCI held that CIL -- through its subsidiaries -- operates independently of market forces and enjoys dominance in the relevant market of production and supply of non-coking coal in India. The CCI noted that CIL did not evolve/ draft/ finalize the terms and conditions of FSAs through a bilateral process and the same were imposed upon the buyers through a unilateral conduct.
While reducing penalty, the CCI noted the steps taken by CIL to improve the sampling procedure even post-passing of the original order by the CCI. However, while holding the extant sampling procedure as unfair, CIL has been directed to incorporate suitable modifications in FSAs to provide for a fair and equitable sampling and testing procedure besides considering the feasibility of sampling at the unloading-end in consultation with power producers and adopting international best practices, the government statement said.
In a statement, Shardul Amarchand Mangaldas & Co (SAM & Co), which acted as the legal advisor to CIL and its subsidiaries, said: “…though CIL enjoys operational commercial freedom, its conduct is constrained by directions received from various stakeholders including Ministry of Power and Ministry of Coal… all of whom exert influence and are involved in making decisions that impact various aspects of CIL's business.” SAM & Co added, “Keeping in mind the continuous steps taken by CIL in resolving issues with stakeholders, the CCI has drastically reduced the penalty amount to Rs 591.01 crore as opposed to a previous amount of Rs 1773 crore. This is for the first time that the CCI has reduced penalty in a case of remand.”
