Probe against CIL for abuse of dominance

Written by fe Bureau | New Delhi | Updated: Jan 31 2014, 10:13am hrs
Following yet another allegation of abuse of dominant position in its fuel supply agreements (FSAs) with power companies, the Competition Commission of India (CCI) has ordered a probe against the countrys largest coal miner, Coal India (CIL), and its subsidiary Western Coalfields (WCL). The complainant in this matter is Maharashtra-based Wardha Power Company.

CCI, through an order dated December 9, 2013, had imposed a penalty of Rs 1,773 crore on CIL for indulging in anti-competition practices related to coal supplies, including unfair conditions imposed on the clauses related to sampling and testing of non-coking coal. In that matter, the complainants were the Maharashtra State Power Generation Company (Mahagenco) and the Gujarat State Electricity Corporation (GSECL).

In its plea to CCI, Wardha Power Company alleged that at the time of execution of the FSA, the provision of a financial risk guarantee was unilaterally incorporated by CIL and WCL. As per the complainant, the amount of financial risk guarantee required to be given under the FSA is the total amount of capital expenditure on the said mine. "There was no justification for this kind of guarantee. Even if such a guarantee could at all be justified, the said guarantee cannot include the entire investment in the subject mine," the complainant said in the CCI order.

Now Wardha Power Company wants CCI to pass a cease and desist order against CIL and WCL to stop them from indulging in anti-competitive activities. It wants the commission to order CIL and its subsidiary to modify the FSA.

It has also sought the investigative report to provide findings on the losses/damages suffered by the company due to the anti-competitive conduct of the two companies.

In its order, CCI has directed its director general (DG), the investigative arm of the commission, to not only investigate the complaint, but also investigate the role of the persons who, at the time of such contravention, were in charge of and responsible for the conduct of the business of the company. CCI wants the DG report to also fix the responsibility of such persons under the provisions of the competition laws.

"The commission is of the opinion that prima facie case was made out against WCL and CIL for investigation... it is a fit case to be investigated by the director general (DG). The report of DG is to be submitted within 60 days," CCI order said on Thursday.

In the earlier matter, CIL has already appealed against the CCI order seeking a stay on the penalty of Rs 1,773 crore and other related matters before the Competition Appellate Tribunal (Compat). The matter is expected to be heard by Compat on February 11.