Hope has ended for private fuel retailers Reliance Industries Limited (RIL) and Essar Oil in their bid to gain a level playing field vis-a-vis government companies. The Petroleum and Natural Gas Regulatory Board (PNGRB) on Wednesday dismissed a complaint of the private oil marketers alleging “cartelisation and predatory pricing” by government-owned IndianOil, Bharat Petroleum and Hindustan Petroleum. The downstream oil regulator has even directed the private sector companies to pay Rs 100,000 to government companies towards costs incurred in the case.
In their appeal made before the PNGRB in 2008, RIL, Essar and Shell India had complained that “cartelisation” by the three government oil marketers had resulted in huge losses and harmed the competition, besides having “annihilated” the private players. Also, it deterred the entry of private players, encouraged fuel adulteration, restricted flow of capital and denied the common man the right to choose fuel, they claimed. The private retailers further alleged that ONGC and OIL sold crude oil to public-sector oil marketing companies (OMCs) at “reduced artificial prices” and, thus, “in a concerted fashion, indulged in unfair and restrictive trade practices”. What’s more, the government’s direction to OMCs regulating prices was only in its capacity as a majority shareholder and not in exercise of powers under the Essential Commodities Act, they claimed.
On Wednesday, PNGRB dismissed the plea, saying the allegations of restrictive trade practice, cartelisation, collusion and monopolistic behaviour had no basis. “Any anti-competitive outcomes that have emerged as a result of the pricing policy of PSU OMCs are not their own making, but have been an unintended consequence of pricing policies thrust upon them by the government,” its order noted.
IndianOil, Bharat Petroleum and Hindustan Petroleum cater to well over 90 per cent of the fuel retail demand. In its attempt to protect domestic consumers from the rising prices, the government regulates prices of diesel, kerosene and domestic cooking gas. The losses of three government companies on these three products are compensated through discounts on crude oil sale by Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), and cash compensation from the government. Of the Rs 138,541-crore loss suffered in the last financial year, 37.91 per cent was compensated by ONGC, OIL and GAIL. The rest came from the government. No such compensation is provided to the private companies.
Private retailers like RIL and Essar have had a rough ride so far. RIL had invested Rs 5,000 crore in fuel retail business, and managed to capture one-fifth of the diesel market within years of its operations. A number of its 1,450 outlets are currently closed. Essar Oil also operates just around 800 of its 1,200 outlets. Shell India has been trying to sell some of its 80 outlets. All these companies failed to match prices offered by the government companies.
PNGRB said it was not persuaded that the respondents indulged in either cartelisation or monopolistic behaviour since it could not make out aby formal agreement between the parties to control prices and markets. “To derive economic advantage, the respondents must have raised their fuel prices above what would have prevailed in a competitive market,” it said.
“On the contrary, the respondents (public sector oil companies) have eroded whatever economic advantage they might have had in following the directive of the Union of India to keep prices below import parity and have occasionally even run into a situation where even their costs were not covered by prices charged to the consumers.”