Anti-trust ruling juices India's power companies - Quoted in the Monitor Frontier Markets

ON-THE-GROUND

"Better certainty of supply of high-quality coal could make power generation sector attractive for foreign investors and the Competition Commission's ruling helps." - Dipesh Dipu, energy sector analyst

The anti-trust ruling Monday against Coal India Ltd. marks the first time in India that a public sector company has been fined for abusing its state-sanctioned monopoly.

The Competition Commission of India has fined this week the state-owned Coal India Ltd. nearly $288 million for monopolistic practices. The curbing of such practices – along with the easing of rules governing import of coal, the pricing of electricity based on the high cost of imported coal, and the passage of a new land acquisition law – should make power generation in India more attractive for investors. 

“There are only two-three independent foreign players in power generation in India and the ones who have come in through Joint Ventures basically supply equipment and not run plants. Better certainty of supply of high-quality coal could make power generation sector attractive for foreign investors and the Competition Commission’s ruling helps,” leading energy sector analyst Dipesh Dipu tells the Monitor.

The world’s largest coal mining company faced the anti-trust ruling for supplying low-quality coal at high prices; retaining the right to unilaterally terminate contracts with buyers; not providing a fair dispute redressal mechanism; and preferring other state-owned companies over private buyers of coal.

The case was filed by two state-owned power companies from Gujarat and Maharashtra. Coal India is a monopoly coal miner and despite being the world’s largest, invariably falls short of the needed supply. It also imports some coal.

“Much of the issues between Coal India and power companies have been resolved with the new pricing mechanism introduced last year. That mechanism has less scope for manipulation.”

The issue of getting enough quantity of coal to power generation companies is slowly getting revolved. But the quality of the coal that the power companies get remains a big concern, says Mr. Dipu.