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CCI penalises Coal India for monopoly, asks Centre to introduce more players

The Competition Commission of India (CCI) has recommended that the government introduce more players in the coal mining sector. The order says that due to Coal India's (CIL) monopoly, electricity consumers are having to pay higher user charges.

“The effects of various anti-competitive factors identified in the coal sector on the rest of the economy are widespread and create systemic risk,” the CCI has said in an order. "Inefficiencies in any one segment are felt in the entire value chain with a cascading impact on the end-consumers of electricity… there is an imperative need to…restructure the sector by introducing more players to reduce the dominance of any one player and facilitate competition," it says.
 
The CCI is forwarding the order to the Coal Ministry. The order passed on December 9 had penalised CIL Rs 1,773 crore for abuse of market dominance. CCI Chairman Ashok Chawla told The Hindu: “The government’s move to bring the coal sector under regulatory oversight will only help if there are enough players in the market.”
 
The CCI order also says that CIL does not enjoy full commercial freedom as its business is constrained by directions from the Power Ministry, the Coal Ministry, the Central Electricity Authority (CEA), the Planning Commission and NTPC etc.
 
With over 250 billion tonnes of coal reserves, and despite the domestic demand for coal growing by 8 per cent annually, CIL’s production has stagnated around 350 million tonnes over the last three years, according to the order.
 
The CCI’s policy recommendation assumes significance as CIL is one of the State-owned companies that the Finance Ministry is relying on to meet its disinvestment target of Rs. 40,000 crore for 2013-14 to in turn be able to keep the fiscal deficit within the target of 4.8 per cent of GDP. The government is exploring if CIL could either pay up a special dividend or go through with a buyback by mid-January. The CIL trade unions have been opposing a stake-sale.
 
The CCI has ruled that the CIL through its subsidiaries operates independently of market forces and enjoys undisputed dominance and has imposed unfair/ discriminatory conditions in the matter of supply of non-coking coal to power producers.

Source: The Hindu