The Supreme Court of India has recently rejected the appeal filed by Coal India Ltd (CIL), thereby upholding the authority of the Competition Commission of India (CCI) to investigate CIL’s actions in accordance with the Competition Act of 2002.
More About the Case
- In 2017, the Competition Commission of India (CCI) imposed a penalty of ₹591 crores on Coal India Ltd (CIL) for engaging in unfair and discriminatory practices in its fuel supply agreements (FSAs) with power producers.
- The CCI found that CIL had been supplying lower quality coal at higher prices and had included non-transparent conditions in the contracts regarding supply parameters and quality.
- The CCI’s argument was based on the assertion that Coal India and its subsidiaries operated without being subject to market forces and held a dominant position in the production and supply of non-coking coal within India.
- CIL operates with the aim of promoting the “common good” and ensuring fair and equitable distribution of coal, which is an important natural resource.
- It refers to the Nationalization Act of 1973 to assert its status as a “monopoly” established to efficiently produce and distribute coal.
- CIL employs differential pricing to encourage captive coal production, with the intention of sustaining the broader operational ecosystem and pursuing welfare objectives.
- Additionally, CIL’s coal supply contributes to national policies aimed at fostering growth in economically disadvantaged regions through increased allocation.
- According to the Raghavan Committee report (2020) referenced by the CCI, state monopolies like CIL are not considered beneficial for the nation and should not operate without competition. This highlights the importance of promoting competition and accountability in the market.
- The CCI emphasized that coal is no longer classified as an “essential commodity” since 2007, and the Nationalization Act was also removed from the Ninth Schedule in 2017. This indicates that coal should be subject to market dynamics and not exempted from the Competition Act, 2002.
- The CCI underscored the significant impact of irregular prices and coal supply on power generation companies, which indirectly affects consumers. Unfair pricing or supply practices by CIL would directly impact consumers’ interests.
- Considering CIL’s role as a significant coal supplier to power companies, the CCI argued that ensuring continuous coal supply, adherence to contracts, reasonable pricing, and quality serve the common good and are in line with the welfare of the nation.
Supreme Court’s Judgement
- The Supreme Court dismissed Coal India Ltd’s (CIL) argument for exemption based on the Nationalization Act of 1973, ruling that it cannot be exempted from the Competition Act. The court emphasized the significance of fair competition and equality among entities, regardless of their sector. It reinforced the principle of “competitive neutrality” and stressed the need for a level playing field.
- The court’s ruling highlights the importance of competition in fostering a vibrant and efficient economy. It underscores the role of fair competition in creating an environment where businesses can thrive and consumers can benefit from a wider range of choices.
- The decision promotes a healthy market competition that ultimately benefits the overall economy and stakeholders involved.
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What is the CCI?
The Competition Commission of India (CCI) is an independent statutory body established under the Competition Act, 2002. It is responsible for promoting and regulating competition in the markets of India.
What is CIL?
Coal India Limited (CIL) is an Indian central public sector undertaking under the ownership of the Ministry of Coal, Government of India. It is headquartered at Kolkata. It is the largest government-owned-coal-producer in the world.
How much coal does CIL produce?
In 2021-22, CIL produced 622.2 million tonnes of coal, which is about 83% of India’s overall coal production.