Bijay Poddar vs. Coal India Limited

Case No. 25 of 2023 Page 1 of 38 COMPETITION COMMISSION OF INDIA Case No. 25 of 2023 In Re: Bijay Poddar 9, Old China Bazar Street, Room No. 99 & 100, 6th Floor, Kolkata – 700 001. …Informant And Coal India Limited Coal Bhawan, Premise No. - 04 MAR, Plot No. – AF-III, Action Area-1A, Newtown, Rajarhat, Kolkata – 700 156. …Opposite Party CORAM: Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Case No. 25 of 2023 Page 2 of 38 Order under Section 26(2) of the Competition Act, 2002 1. The present information has been filed by Bijay Poddar (‘Informant’) under Section 19(1)(a) of the Competition Act, 2002 (‘Act’), against Coal India Limited (‘CIL’/‘OP’) alleging inter alia contravention of the provisions of Section 4 of the Act. OP is a 'Maharatna' Public Sector Undertaking under Ministry of Coal (‘MoC’), Government of India and is the single largest coal producing company in the world. 2. The Informant has stated that the OP introduced a new scheme for e-auction of coal effective from 21.12.2022 named CIL e-auction scheme 2022 (‘2022 Scheme’) which replaced the earlier scheme i.e., Spot E-Auction Scheme 2007 (‘2007 Scheme’). 3. The Informant alleged that various provisions of the 2022 Scheme are one-sided and “unfair, complex and discriminatory” which inter alia include requiring the bidders to clear all pending dues before bidding, taking a fixed advance bid security which has a discriminatory effect on different bidders when bid security is forfeited, the OP having the right to cancel the sale of coal under e-auction at its sole discretion without assigning any reason thereof, etc. The Informant has alleged that almost all the terms and conditions of the 2022 Scheme are one sided in favor of the OP without any corresponding reciprocal responsibility/penalty on the OP, in contravention of Section 4(2)(a)(i) and 4(2)(a)(ii) of the Act. The Informant has also sought Interim Relief under Section 33 of the Act against the OP. 4. The Commission considered the matter and vide its order dated 08.05.2024 decided to forward a copy of the Information to the OP for submitting its comments on the allegations contained therein. After seeking extension of time, the OP submitted its response on 12.08.2024. OP’s comments 5. It has been inter alia averred by the OP that the relevant product market should be the market for the ‘sale of non-coking coal except under Fuel Supply Agreements’. It is further submitted that in terms of characteristics and intended use, all non-coking coal is substitutable and part of the same relevant market. Therefore, the non-coking coal supplied under the institutional mechanisms would be both interchangeable and Case No. 25 of 2023 Page 3 of 38 substitutable with the non-coking coal sold under the 2022 Scheme. However, OP has further stated, there is a difference in the intended use of coal under institutional mechanisms such as Fuel Supply Agreements (‘FSAs’) with power companies. 6. It is further submitted by the OP that the relevant geographic market should be global. OP has submitted that the conditions of demand and supply for coal are homogeneous globally. This is particularly true in the case of e-auctions, where bidders continually opt for imported coal as a substitute for coal from e-auctions. Further, it has been stated that MoC recognises that both imported coal and domestically procured coal constitute a part of the same market as its National Coal Index (‘NCI’) has weightage as high as 50.25% for imported coal in case of non-coking top grade coal, which demonstrates the substitutability of imported coal with OP’s coal. 7. It is submitted by the OP that the increase in the quantity of imported coal is in competition with coal supplied under e-auction, thereby making it substitutable for the consumer. It is submitted that there has been a steady increase in the import of non- coking coal over the past few years. In FY 2021-22, coal imports amounted to 151.77 Million Tonnes (MT), in FY 2022-23, this increased to 181.62 MT and in FY 2023-24, this went up to 202.88 MT. It is submitted by the OP that the prices of non-coking coal sold under e-auction are comparable to the prices of imported non-coking coal for similar grades of coal. 8. The OP has submitted that even though it is the largest coal producer in India, it is not dominant in terms of Section 4 of the Act, as it cannot act independently of market forces, nor can it influence the market or competitors or consumers in its favour. The OP has stated that India only produced 10.67% of the world’s coal in 2023. As such, OP is not dominant in the global coal supply market. Further, major global competitors like Peabody Energy and Shenhua Group also constrain OP's market power. 9. On the issue of dominance, it has been further stated by OP that it is not dominant in the market for coal supply in India as: (i) OP's market position arises from the Coal Mines Nationalisation Act, 1973 and accordingly, its statutory status should be considered a mitigating factor under Section 19(4) of the Act; (ii) OP's autonomy is constrained by Presidential Directives and directions from the MoC and there is substantial Government Case No. 25 of 2023 Page 4 of 38 control over the OP’s activities, limiting its commercial discretion; and (iii) the OP bears significant social costs and obligations, including operating a number of loss-making mines. 10. The OP has further submitted that guidelines issued by the MoC elucidate that it cannot arbitrarily choose the quantity of coal to be supplied to its customers. The MoC Guidelines unequivocally mandate that the OP and its subsidiaries must ensure the supply of coal to consumers in the power sector, meeting their Power Purchase Agreement (‘PPA’) requirements regardless of the trigger and annual contracted quantity levels. This stringent directive leaves OP with no commercial autonomy to determine the organization of e-auctions or to decide the quantity of coal allocated for such auctions. 11. Without prejudice to its above-mentioned submissions that it is not dominant in any plausible relevant market, the OP has asserted that it has not abused its market position and has provided clause-wise clarifications regarding the same. It has stated that it has always acted fairly given the wide-ranging constraints faced by it from various stakeholders. 12. The OP has submitted that the Informant previously filed another information before the Commission against OP and its subsidiaries, alleging a violation of Section 4 of the Act (Case No. 59 of 2013). It has been stated that the Informant challenged various clauses of the 2007 Scheme in the said information and a comparison of the 2007 Scheme and the 2022 Scheme shows that many clauses are substantially similar. OP has submitted that the Commission adjudicated the issues raised by the Informant in the Case No. 59 of 2013 and did not find any clauses of the 2007 Scheme to be violative of the Act, except clause 9.2 (which is sub-judice with the Hon’ble Supreme Court). 13. OP has further stated that due to the administrative nature of the allegations concerning clauses 3.1 (Notifications for e-auctions), 7.2 (Validity period for lifting of coal by road), 11.6, and 11.12 (Procedure for filing complaints) of the 2022 Scheme, these should be dismissed, and they do not impact competition in the markets or violate the Act. It is stated that Informant has failed to make any prima facie case for violation of the relevant provisions of the Act and the Information deserves to be dismissed outright.