Higher grade coal supply leads to generation and financial losses

Last Updated: Sun, Feb 10, 2013 21:00 hrs

The Madhya Pradesh Power Generation Company (MPPGCL) has approached Competition Commission of India (CCI) against Coal India Limited (CIL) and South Eastern Coalfields Limited (SECL), challenging alleged abuse by these two of their dominant position in coal supply at the inflated rate.

MPPGCL managing director V Nanavati confirmed MPPGCL’s move to file its petition at CCI. "It is in the larger interest of the state and consumers of electricity," he told Business Standard.

In its petition (which is in the possession of Business Standard) under the provisions of Competition Act, 2002, MPPGCL has asked the CCI to investigate the matter and declare that it (MPPGCL) had suffered losses and injury due to the abuse by CIL and SECL. MPPGCL said that it had filed its petition before the CCI due to the absence of a coal regulator.

MPPGCL, with an installed thermal capacity of 2932.5 MW in its petition, has referred to the coal supplied to its 1,340 MW Sanjay Gandhi thermal power station by SECL as per the provisions of Coal Supply Agreement (CSA), which, it says, are unfair, one-sided, discriminatory and in violation of Section 4 (2) (a) of the Competition Act, 2002.

According to MPPGCL, the boilers of the Sanjay Gandhi thermal power station are designed for a calorific value of around 3700 kilocalorie/kg, but SECL is supplying a higher grade of coal exceeding 5800 kcal/kg, which is causing various technical problems to the plant besides being economically unviable to the company.

Moreover, MPPGCL argued that higher grade coal is being supplied by SECL in particular with intent to restrict competition in the relevant market and the entire conduct is based on the policy of “Pay Whether Agree or Not” basis. Under this method, the purchaser has to accept the coal whether he is satisfied or not with the qualities and quantities of coal supplied. Even if the purchaser refuses to accept the said standard or lower coal, the delivery would be considered as “Deemed Delivery” and the purchaser would be bound to make the payment thereof.

MPPGCL has asked CCI to direct SECL to limit the supply of G3 to G5 Band coal to not more than 20 per cent and in place supply G6 to G12 band coal. MPPGCL added that the absence and denial of joint sampling of coal has led to a deterioration of both, the quality and quantity of coal.

MPPGCL is only the latest company to approach the CCI about the alleged abuse of its dominant position by CIL and its subsidiaries. Before it, Maharashtra State Power Generation Company (MahaGenco) and a couple of other generation companies have already filed pleas before the CCI.

CCI has already launched investigations into the alleged abuse of market dominance especially related to fuel supply agreements (FSAs).

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