The Competition Commission of India (CCI) has imposed a penalty of Rs. 1773.05 crores on Coal India Limited for abusing its dominant position. The final order was passed on 09.12.2013 on a batch of informations filed by Maharashtra State Power Generation Company Ltd. and Gujarat State Electricity Corporation Limited against Coal India Ltd. and its subsidiaries (Mahanadi Coalfields Ltd., Western Coalfields Ltd., South Eastern Coalfields Ltd.).

The CCI held that CIL through its subsidiaries operates independently of market forces and enjoys undisputed dominance in the relevant market of production and supply of non-coking coal in India. The Commission inter alia also held CIL and its subsidiaries in contravention of the provisions of section 4(2)(a)(i) of the Competition Act, 2002 for imposing unfair/ discriminatory conditions in Fuel Supply Agreements (FSAs) with the power producers for supply of non-coking coal.

Apart from issuing a cease and desist order against CIL and its subsidiaries, the CCI directed modification of FSAs in light of the findings and observations recorded in the order. The impugned clauses related to sampling and testing procedure, charging transportation and other expenses for supply of ungraded coal from the buyers, capping compensation for supply of stones etc.

Further, for effecting these modifications in the agreements, CIL was ordered to consult all the stakeholders. CIL was also directed to ensure parity between old and new power producers as well as between private and PSU power producers, as far as practicable. The common order of the Commission was passed in Case Nos. 03, 11 and 59 of 2012.

Abuse of dominant position leads to mandated modification of fuel supply agreements and penalties for discriminatory contractual clauses. Coal India Limited and certain subsidiaries were found to hold dominant position in the non coking coal market and to have abused that dominance by imposing unfair, discriminatory terms in Fuel Supply Agreements-notably biased sampling and testing procedures, charging buyers for transportation and ungraded coal expenses, and capping compensation for stones. The Commission directed a cease and desist, monetary penalty, mandated modification of FSAs to remove discriminatory clauses, and required stakeholder consultation and parity between different classes of power producers in implementing changes.