CIL to take legal action against Rs 1,773 cr CCI penalty order

Coal India today said it will initiate "appropriate legal action" against Competition Commission of India's (CCI) order, slapping Rs 1,773 crore penalty on it for unfair trade practices.

"The Company is seized of the matter and appropriate legal action shall be initiated after the receipt of the copy of the order by post," Coal India (CIL) said in a filing to the BSE.

The development comes against a backdrop of the fair trade watchdog slapping a fine of Rs 1,773 crore on CIL, the first major penalty on a state-owned company by it, for allegedly abusing its dominant position in fuel supplies.

The CCI, in its order on December 9, said that CIL is operating independently of market forces and enjoys an undisputed dominance in the country for production and supply of non-coking coal.
Touching upon a host of issues related to coal supplies, including sampling and testing procedures, the regulator also ordered the world's largest coal miner to modify the fuel supply agreements (FSAs) after consulting stakeholders.

The fair trade regulator has also directed the company to cease and desist from anti-competitive practices.

The order came on complaints filed by Maharashtra State Power Generation Company and Gujarat State Electricity Corp against Coal India and three subsidiaries -- Mahanadi Coalfields, Western Coalfields and South Eastern Coalfields.

The quantum of penalty -- Rs 1,773.05 crore -- is equal to three per cent of the PSU's average turnover for the last three years.

The ruling assumes significance since in recent times, Coal India has drawn flak for fuel shortages that have been hurting the country's power generation.

According to the CCI order, Coal India abused its dominance and did not try to evolve/draft/finalise terms and conditions of FSAs through a mutual bilateral process.

"... the same were sought to be imposed upon the buyers without seeking, much less considering, the inputs of the power producers," the CCI said.

The Commission said that Coal India was "imposing unfair/discriminatory conditions in FSAs with power producers" that violate fair trade norms.

Besides, the CCI has directed Coal India to ensure parity between old and new power producers as well as between private and public sector power producers, "as far as practicable".

CIL shares closed at Rs 288.75 apiece, up 1.16 per cent from their previous close on the BSE.