Editorial: Follow up CIL advantage

Dec 13 2013, 22:26 IST
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SummaryTake on other PSUs that act as monopolies

Given the nature of complaints by electricity boards in Gujarat and Haryana against Coal India Ltd (CIL) and three of its subsidiaries, and the fact that similar complaints were made by NTPC, it’s not surprising that the Competition Commission of India (CCI) has held CIL guilty of unfair trade practices and has fined it 3% of its average turnover over the last three years, or R1,773 crore. And while keeping in mind that many of the actions of CIL were in consonance with various directives of the central government, the CCI has still held CIL guilty of foisting one-sided contracts on buyers.

What is interesting about the ruling that CIL has said it will contest is that the CCI is now willing to look into non-competitive actions by PSUs. This marks a first and private firms in other areas would do well to look at the anti-competitive practices of various PSUs. PSU telcos like MTNL and BSNL, for instance, have refused to allow interconnection facilities to private sector firms. Whether the CCI can be petitioned to increase the scope of its inquiry is not known, but price preferences to PSUs in government tenders is another example of anti-competitive practices as is the one, for instance, of giving Air India pride of place in most airport terminals even though private airlines have a higher market share.

The other interesting part of the CCI ruling, and it has sent a copy to the coal ministry, is what it has said about the overall government policy for the coal sector. It has said there is an imperative need to introduce more players so as to reduce CIL’s monopoly. While the Prime Minister has spoken of the need to do this on occasion and the BJP introduced a Bill in the Rajya Sabha to this effect—this means the Bill is still ‘alive’—doing this has not been top priority for either the government or the Opposition. It has to be seen whether this part of CCI’s ruling has any effect. While it is true CCI has no jurisdiction on government policy, it does have a locus when it comes to competition policy—and it is very clear that as long as there is a monopolist, the chances of it abusing its market power are high. The ball is now in the government’s court.

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