CCI imposes reduced penalty of Rs591 crore on Coal India for fuel supply pacts

The Competition Commission of India (CCI) has asked Coal India to modify the Fuel Supply Agreements (FSAs) and also ensure uniformity between private and govt power producers


The penalty amount of Rs591.01 crore translates to 1% of Coal India’s average turnover for the three-year period from 2009-10 to 2011-12. Photo: Bloomberg
The penalty amount of Rs591.01 crore translates to 1% of Coal India’s average turnover for the three-year period from 2009-10 to 2011-12. Photo: Bloomberg

New Delhi: The Competition Commission of India (CCI) has imposed a reduced penalty of Rs591 crore on Coal India Ltd for fuel supply pacts.

CCI asked Coal India to modify the Fuel Supply Agreements (FSAs) and also ensure that uniformity between old and new power producers as well as between private and state power producers.

Friday’s ruling is the second order by CCI in the matter as its first ruling, passed in December 2013, was set aside by Competition Appellate Tribunal (Compat). CCI had imposed a penalty of Rs1,773 crore on Coal India in the first order, which Compat set aside recommending a fresh look at the allegations.

“Keeping in mind the continuous steps taken by Coal India Ltd in resolving issues with stakeholders, the CCI has drastically reduced the penalty amount to Rs591.01 crore as opposed to a previous amount of Rs1,773 crore,” Coal India’s legal adviser Shardul Amarchand Mangaldas and Co. said in a statement.

In its 56-page order, CCI has found Coal India violating competition norms by “imposing unfair/ discriminatory conditions in the matter of supply of non- coking coal to power producers”.

It further said that Coal India did not “evolve/ draft/ finalise the terms and conditions of FSAs through a mutual bilateral process and the same were imposed upon the buyers through a unilateral conduct”. It also directed the state-owned firm to “cease and desist” from anti-competitive practices.

The penalty amount of Rs591.01 crore translates to 1% of Coal India’s average turnover for the three-year period from 2009-10 to 2011-12.

The complaints were filed against Coal India and its three subsidiaries—Mahanadi Coalfields Ltd, South Eastern Coalfields Ltd and Western Coalfields Ltd. They were filed by Maharashtra State Power Generation Co. Ltd and Gujarat State Electricity Corp. Ltd.

Even though Coal India enjoys operational freedom on commercial matters, CCI said its conduct is constrained by directions received from various stakeholders including coal and power ministries.

“... all of whom exert influence and are involved in making decisions that impact various aspects of Coal India Ltd’s business,” the order said.

The regulator also noted that the company decides on pricing of coal keeping in mind the larger public interest and its social obligations.

Coal India has also been directed to incorporate suitable modifications in the fuel supply agreements to provide for a fair and equitable sampling and testing procedure.

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