Claim: It becomes essential to restructure the coal industry by abolishing the current policy

biases that work against the concept of competition in the sector. There is a need to strengthen
regulatory and enforcement mechanisms so that the demand for coal in the country is met
without hindering environmental and social sustainability.

Issue 1) As per Section 3 of The Coal Mines (Nationalisation) Act, 1973294, which ― deals
with exclusive rights to a supplier, namely the Ministry of Coal Or CIL or SCCL, to provide
goods or services such as mining, production, and sale of coal. Hence it controls the number of
firms permitted to enter the coal sector, and it is amply clear that only state-owned enterprises
operate in this sector. Further, government companies receive benefits or preferential treatment
that is not available to other firms, which has the effect of limiting competition in the coal sector.
The regime at present reduces the incentive for suppliers to compete. As a result, coal companies
have been slow in adopting new techniques or increasing the size of equipment.

Issue 2 With regard to the non–working of Coal Blocks and Mining Licenses, CIL does not
invite cancellation and State-owned enterprises receiving any benefits or preferential treatment
not available to other firms, which appear to have the effect of limiting competition in the coal
sector.

Issue 3) According to Section 11 of The Coal-Bearing Areas (Acquisition and Development)

Act, 1957, it is clear that state-owned enterprises operate in the markets and receive benefits and
preferential treatment not available to other firms. As it is clear that, generally, the blocks offered
to private players for captive mining are of poor quality and are not amenable to economic
development. Moreover, the allotment of blocks to different parties is made on the
recommendations of CIL, and CIL is also the custodian of all the coal blocks. It is also the
condition of offering only virgin blocks devoid of any infrastructural facilities to private players
that serves more to obstruct the competition than allow it.

Issues4 )The Mines and Minerals Development and Regulation Act, 1957 again grants exclusive
rights to government companies in the grant of reconnaissance permits, prospecting licenses or
mining leases to sectors where captive mining is allowed to provide coal by restricting private
player participation. ―The government is empowered to reserve coal blocks for government
companies. Moreover, it is silent on the kind of coal blocks that will be put up for auction, which
again results in CIL and SCCL being allocated prime coal blocks while private companies have
to participate in an auction‖. With respect to the Mines and Minerals Bill 2011, proposed Clause
4(2) ―‘exempts government companies from the requirement of obtaining a reconnaissance or
prospecting licence. This grants an unfair advantage to companies competing with these
companies. Further, public sector enterprises also carry out exploration without the involvement
of private players.
Issue 5 ) There is inaccessible data on extractable coal reserves and inadequate data for private
players. It imposes restrictions on the ability of some types of suppliers to provide a good or
service. All these aspects show that certain firms in the market suffer from the unequal
application of laws or regulations.

Issue 6) Due to nationalization, various advantages are granted only to CIL and State-owned
enterprises. For example: receiving benefits, and preferential treatment, among other things that
are not available to other firms, appear to have the effect of limiting competition in the coal
sector.

Issue 7) Further, there is a limitation on the ability of a seller to set the prices for goods or
services further; government policies influence CIL‘s pricing decisions. There are price
distortions and the absence of an independent regulator. Clearly, the Ministry of Coal is guiding
the pricing of coal, and there have been various talks of introducing price reforms in the sector.
The absence of independent regulatory oversight accelerates the impact of a monopolistic market
structure. As the presence of an independent regulator is significant for creating a level playing
field, introducing competitive price regulations, boosting investments in the sector and governing
the allocation of blocks, approving mines, etc. Over the last, few need to establish an
independent regulator has been widely debated. In 2012, the Coal Regulatory Authority Bill was
introduced. The bill does not give pricing power to the regulator; however, it empowers them to
frame rules and methodologies for determining the price.

Issue 8 )The underdevelopment of infrastructure and transport, in effect, reinforces the

monopoly status and reduces any potential competition.

Issue 9) This sector is subject to regulations and policies that are costly, time-consuming, and
frequently change, creating a level of policy uncertainty which indirectly causes hindrance to
competition.

Warrant: M/s Maharashtra State Power Generation Company Ltd. v. Coal India Ltd. & Ors. The
CCI observed in this case that cil is abusing its dominant position in the market, “the effects of
various anti-competitive factors identified in the coal sector on the rest of the economy are
widespread and create systemic risk. 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. Further, CCI has also observed that consumers have been paying
higher electricity rates due to the monopoly of CIL. CCI ruled that ―CIL, through its
subsidiaries, operated independently of market forces and enjoyed undisputed dominance and
has imposed unfair/ discriminatory conditions in the matter of supply of non-coking coal to
power producers and, in lieu of its observations, imposed a penalty of Rs. 1773 crores, a first of
its kind over a public sector enterprise. CIL is not only the nation‟s largest coal producer but also
the single largest coal producer in the world.”

Sai Wardha Power Generation Ltd., vs Western Coalfields Limited293, Competition Appellate
Tribunal (COMPAT) upheld an order of CCI against CIL and Western Coalfields Limited for
acting independently of market forces and being in a dominant position on the market for the
production and supply of non-coking coal to thermal producers, which in violation of the
Competition Act.

Backing: Section 4 of the Act lists several practices considered to be abusive that can broadly be
divided into two different kinds of abuses:

1) exclusionary abuses, which include practices of the dominant entity that exclude other players
in the relevant market.
2) exploitative abuses include practices of the dominant entity that tend to exploit their position
by imposing unfair or discriminatory restrictions on other players and consumers in the market.

Rebuttal: Before CIL was established, that was In the early 1970s, the coal sector was suffering
due to unorganized growth, incapability to supply to the wants of the economy together with
unscientific exploitation of coal reserves, deplorable conditions at work, etc., however after CIL
Was established there was an increase in efficiency, capital investment in the coal sector, better
working conditions for workers, and there was a check on unscientific mining.

Qualifier: assessment of dominance: While determining dominance, the CCI

considers factors listed under section 19(4) of the Act. Although the CCI
acknowledges that market shares are 'the most important criterion/yardstick in the
assessment of dominance, there is no bright line market share test, and the CCI has
often adopted a holistic approach in concluding dominance.
The market share of an entity is 'only one of the factors that decide whether an
enterprise is dominant or not, but that factor alone cannot be decisive proof of
dominance.