Oil companies under CCI scanner for price-fixing

Investigative wing of the Commission will soon serve notices to these companies seeking there response on the matter

The Competition Commission of India (CCI) has ordered a probe by its Director General (Investigation) into the alleged cartelisation of state-owned oil marketing companies (OMCs) for fixing petrol prices.

CCI reckons the three state-owned OMCs — IndianOil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd — not only revise petrol prices by same amount, these companies often do this on the same day.

The investigative wing of the competition watchdog will soon serve notices to these companies, seeking their response on the matter, a senior official said, requesting anonymity.

According to the official, CCI had earlier written to the ministry of petroleum and natural gas on the issue.

However, the ministry has cut corners saying petrol is no longer a regulated product and the companies determine the prices based on a pricing formula.

Following the ministry’s response, CCI has referred the case to DG for further investigation.

The Commission refers cases for investigation only when it is convinced that there is prima facie evidence of violating competition norms.

“It appears that there is a coordinated pricing strategy adopted by state-owned oil marketing companies. This approach is not only impacting consumer interest, it is also likely to create entry barriers for private players in the sector,” another CCI official told Business Standard.

Since June 2010, when petrol prices were decontrolled, OMCs have revised the prices in tandem for 34 times, which has seen a 23 per cent hike in prices from Rs 51.43 per litre on June 26, 2010 to Rs 63.09 on May 1, 2013.  

Even as allegations of prices cartelisation continued to exist, the three state-owned companies revised even diesel prices together for five times since January 17 this year, when the Central government decided to go for phased decontrol of the fuel price.

Diesel prices have gone up from Rs 47.65 a litre in Delhi on January 17 to Rs 49.69 as on May 11, when prices were revised for the last time.

However, OMCs say the coordinated pricing strategy is in favour of consumers as the fuel is available at the same price in all pumps in a particular city.

“Anyone can allege us for cartelisation. But do you think it would do justice to consumers, if they get petrol and diesel at one price in an IOC fuel station and a varied price at HPCL station in the same city? It would affect the consumers badly,” said a top IOC official, who also did not want to be named.

According to the Competition Act, 2002, a cartel is said to exist when two or more enterprises enter into an explicit or implicit agreement to fix prices, to limit production and supply, to allocate market share or sales quotas, or to engage in collusive bidding or bid-rigging in one or more markets.