<p>The Competition Commission of India (CCI) has questioned the coordinated pricing strategy of state-owned oil marketing companies (OMCs). It plans to write to these companies over the matter soon.
“The coordinated approach of OMCs is not only impacting consumer interest, it is also likely to create entry barriers for private players in the sector. We will write to them about it soon,” a senior CCI official told Business Standard.
The CCI reckons the three state-owned OMCs — Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — not only revise petrol prices in tandem, these do this on the same day.
Earlier, these companies revised petrol prices with a marginal lag — a gap of a few hours or a day. Lately, however, these have been revising prices together. For instance, last month, the three state-owned OMCs raised petrol prices together — by Rs 6.28 a litre, excluding taxes. Even during the recent price cut, the three coordinated to slash prices by Rs 2.02 a litre, which was again implemented on the same day.
The unison is not restricted to price revisions alone, these companies are even holding press conferences together. After the price rise in November 2011, IOC and BPCL held a joint press conference, while in June, IOC teamed up with HPCL to explain the logic behind the rise in prices.
The CCI believes this understanding between the state-owned OMCs is anti-competitive and could be a violation of the Competition Act. It has already taken up the matter with the petroleum ministry, the CCI official said, adding the idea behind deregulation of petrol prices was to encourage competition in the market. However, the purpose had been defeated by oil retailers forming a cartel, he said.
Industry experts say CCI has its task cut out, as the government holds majority stakes in all these companies and any action against a company could mean taking the government head-on. However, CCI is empowered to penalise any company for cartelisation. It is also empowered to take action against government departments.
Though the prices of petrol were deregulated in June 2010, the last rise in prices came after six months.
This was because the government did not allow any price increase due to political compulsions, despite oil prices soaring after the huge depreciation in the rupee against the dollar.