The Competition Commission of India (CCI) has pulled up Coal India Limited (CIL) for taking undue advantage of its monopoly position in the country and supplying cheap quality coal to state utilities.

The competition watchdog has given CIL four weeks to respond to the allegations levelled against it that it has violated certain provisions of the Competition Act and has been operating in an unfair manner while state utilities and regulators have decided to impose penalties on it for selling poor quality coal mixed with stones.

“We have sent a formal order to CIL and other parties including the complainants and have given them a time frame of four weeks to respond. Prima facie there appears to be evidence of violations made by CIL,” said Rajinder Chaudhry, director (Media), Press Information Bureau, Competition Commission of India.

However, CIL has denied that it has received any such communication from the competition watchdog. “As of yet we have not received any such order from CCI and we would not like to comment on the issue,” said CIL spokesperson Devendra Prasad.

Responding to complaints made by state-run power utilities Maharashtra State Power Generation Company (Mahagenco) and Gujarat State Electricity Corporation (GSEC) a year ago alleging that CIL along with its subsidiaries was imposing unfair terms on them, CCI launched an investigation.

According to the complainants, the Maharatna PSU supplied coal in an ad hoc manner, misrepresented the grade of coal and only entered into one-sided supply pacts. Cheap quality of coal mixed with stones and boulders, they added, led to an increase in production costs. They further said that even if the consignment of inferior quality of coal was rejected by the utilities, CIL regarded it as a case of deemed delivery and demanded payment.

“The director general submitted the investigation report around two weeks back and it has been accepted by CCI after review. Findings of the report suggest that there are certain issues regarding the quality of coal supplied by CIL. Also taking advantage of its monopoly position, CIL has entered into one-sided (supply-sided) agreements with the buyers without negotiating the terms and conditions,” Chaudhry added.

On being asked if the issue was a first-of-its-kind Chaudhry replied, "In the past only preliminary inquiries had been made against the state-run companies but this is the first instance in which investigation has been carried out against a state-run company."

Furthermore, in a meeting held between utilities, power firms and CIL, it was decided that if CIL is found supplying poor quality of coal it will have to pay an additional surcharge as penalty for buying electricity from power generators.

A committee comprising various stakeholders has been set up which will ensure that CIL adheres to the grade promise from April 1 and if it comes across any grade slippage it will report the matter to the regulators and impose penalties on the PSU.