Oil regulator to hear case on fuel pricing

The Petroleum and Natural Gas Regulatory Board (PNGRB) will resume hearing the case on petroleum product pricing between private oil companies and government oil marketing companies (OMCs).

Private companies, including Reliance Industries, Essar Oil and Shell India had filed a petition before PNGRB against the OMCs — Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) — alleging that they had indulged in “predatory pricing” in sale of transport fuels.

The Supreme Court last month permitted the downstream oil sector regulator to proceed with the case while asking it not to pass a final order.

“The Board is likely to resume hearing of the case by the month end as the Supreme Court has allowed it to proceed,” said a Board official.

The private companies had appealed to the Board to levy a penalty on the government-promoted companies for the losses incurred by them. The government companies sell petrol and diesel at cheaper rates and control over 90 per cent of the market.

Public sector oil marketing companies, led by IOC, however, approached the Appellate Tribunal for Electricity (Aptel), challenging the authority of the Board to decide a petition by private oil companies last year.

Subsequently, Aptel upheld the Board’s power to adjudicate the matter. Aptel also asked the government to clarify its stand on pricing of petroleum products since the OMCs told Aptel that the pricing of petroleum products was a policy matter decided at the highest government level and is beyond their control.

However, even before the Board could start proceedings, IOC filed a petition at the Supreme Court against Aptel’s order. While admitting the petition, Supreme Court said the Board could proceed with the hearing.

The government determines prices of petrol and diesel even if it means losses for the OMCs. The loss is made up by government bonds and discounts by oil producers. The private oil marketing companies, however, are not provided any such compensation and had to shut their retail operations when crude oil prices rallied to three digits, touching a high of $147 a barrel in July 2008.

Although the situation has improved, with crude oil prices hovering around $86-87 a barrel, private companies are adopting a cautious approach. While Essar has opened all its 1,339 outlets, Reliance is just operating 600 of its 1,430 outlets.