CCI orders probe into ‘abuse of dominant position’ by MSEDCL

* In its order issued on Wednesday, CCI has asked its Director General to investigate the role of persons in charge and responsible for alleged conduct of companies

By Kartik Lokhande 

In a major development, Competition Commission of India (CCI) has directed its Director General to conduct a probe into the alleged ‘abuse of dominant position’ by Maharashtra Electricity Distribution Company Limited (MSEDCL). Hearing a case filed by Vidarbha Industries Association (VIA), CCI has asked its Director General to complete the investigation within two months.
VIA had filed a case with CCI against MSEB Holding Company Limited, Maharashtra State Power Generation Company Limited (Mahagenco), MSEDCL, and Maharashtra State Electricity Transmission Company Limited (Mahatransco). According to R B Goenka, VIA’s Energy Expert, VIA had alleged that these power utilities as a group had abused their dominant position inter alia by deliberately generating and distributing electricity in ‘extremely inefficient’ manner and by denying market access to ‘other efficient and economical’ power generating companies.
“The inefficient activities is reflected in the exorbitant cost structure submitted to Maharashtra Electricity Regulatory Commission and it results in increase in power tariff,” said Goenka. After hearing and inspection of documents submitted by VIA, the CCI issued an order under Section 26 (1) of the Competition Act, 2002 and directed its Director General to investigate into the matter and submit the report within a period of 60 days.  CCI also directed its Director General to investigate the role of persons who were in charge and were responsible for the alleged conduct of such companies.
After hearing the matter and going through the allegations levelled by the petitioner, CCI observed that MSEDCL was the only licensee distributor of electricity in the relevant geographic market and hence it was a ‘monopoly distributor’ of electricity there. With respect to VIA’s allegation that MSEDCL continued to buy poweer from ‘cost inefficient Mahagenco, CCI observed that MSEDCL purchased electricity from Mahagenco at rates ‘comparatively higher than the rates offered by other electricity generating enterprises.’ “This translates into higher tariff charged to the end consumer as that tariff is decided by MERC on the basis of purchase cost of MSEDCL. Prima facie, the said conduct of MSEDCL amounts to indirect imposition of unfair price on the consumers, which is in contravention of Section 4 (2) (a) (ii) of the Competition Act,” observed the CCI.
As far as allegations of MSEDCL denying open access to others is concerned, CCI stated it clearly that denial of open access ‘shut the door on competition in the distribution market.’ Holding that MSEDCL’s conduct was prima facie in contravention of Section 4 (2) (c) of the Competition Act, the CCI observed, “The consumers are left with no choice but to keep buying power at whatever rate the distribution company supplies. On the other hand, a generator, who can become a rival distributor through open access, cannot supply electricity to the consumers.”
The CCI hearing was conducted before the coram of Ashok Chawla, Chairperson; and members Anurag Goel, S L Bunker, and Sudhir Mittal. Advocates K K Sharma and Danish Khan appeared for VIA. In its order issued on Wednesday, CCI further made it clear, “Nothing herein shall tantamount to an expression of official opinion on the merits of the case and the DG shall conduct the investigation without being influenced by any observation made therein.”
In its petition, VIA alleged that irrespective of the price charged by Mahagenco, MSEDCL purchased all the power generated by it. “Since the tariff for the power purchase is decided by MERC as per the cost structure and revenue forecast submitted by MSEDCL, due to inefficiency of Mahagenco, the cost structure remains very high. In such a scenario, MERC is bound to determine tariff at a rate which is much higher than the prevailing market rate. Resultantly, the consumers of MSEDCL are paying the highest electricity tariff compared to all other states in India,” VIA had alleged. 

(06-08-14)

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