Madras HC asks TN govt to furnish bank guarantee

Centre is currently incurring loss due to interim injunction the state has secured against higher pricing of bulk diesel

The Madras High Court today asked the Tamil Nadu government whether it could give a bank guarantee or a bond for the loss the Centre is incurring currently due to the interim injunction the state has secured against higher pricing of bulk diesel. In the event of the state losing the case, the Centre could then encash the guarantee.

A bench of judges Rajesh Kumar Agrawal and N Paul Vasanthakumar also asked the petroleum ministry whether it would accept if the Tamil Nadu government gives such a statement, which the Centre could invoke if the state loses the case. The court has asked the Centre to respond by Thursday.

The ministry had on Monday filed a petition with the bench, to suspend the injunction passed by a single judge restraining the ministry and the oil companies from collecting higher price from bulk consumers of diesel. The ministry argued that due to the injunction, the ministry and oil companies are suffering a loss of Rs 8.57 crore a day.

According to the interim injunction order, the ministry and the oil companies has to sell diesel to the state transport corporations at the price prevalent before the decontrol of diesel prices. According to the announcement, the Centre has increased diesel prices by Rs 11.81 a litre for bulk consumers and 40-50 paise a litre for retail consumers from January 18, 2013.

Prior to that, diesel price fixed by the oil marketing companies to the state transport corporations was Rs 49.72 a litre. The per-day diesel consumption in the state is 1.73 million litres.

The state government in its petition to the single Bench had said that the total cost incurred due to the price increase was Rs 8.57 crore.

During the hearing today, the ministry argued that the interim injunction should be suspended, since the price increase is a policy decision of the Centre.

It said it was not given ample opportunity to argue before the interim order was issued. P Wilson, additional solicitor general of India, also argued that no reason was given for allowing the injunction plea.

Advocate-General of Tamil Nadu, A L Somayaji, argued that the steep hike in bulk diesel prices has affected the poor and middle class people, while the subsidised retail prices favoured the rich who owns luxury vehicles. He said the injunction order is only for a limited period till April 12, after which the court might take a decision based on the arguments of both parties.

The division Bench observed that the interim order has not given any reason for issuing the injunction. The Bench also noted that the policy of dual pricing is also faulty since there was no mechanism to check whether the bulk consumer is enjoying the benefits of the retail consumer by filling fuel from retail outlets instead of purchasing the bulk fuel, which the oil companies deliver at their door steps.

It may be noted that Justice S Rajeswaran, while giving the interim injunction, also directed to issue a notice to the Secretary of Ministry of Petroleum and Managing Directors of the public sector oil marketing companies - Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited and Indian Oil Corporation Limited. The notice issued is returnable on April 12, 2013.