CCI imposes Rs 38 cr penalty on 18 sugar mills, 2 associations

Fair trade regulator CCI Tuesday imposed a total penalty of Rs 38.05 crore on 18 sugar mills and two trade associations for bid rigging with regard to a joint tender floated by oil marketing companies (OMCs) for procuring ethanol for blending with petrol.

Besides, the regulator also directed the sugar mills and the associations -- Indian Sugar Mills Association (ISMA) and Ethanol Manufacturers Association of India (EMAI) -- to "cease and desist" from indulging in conduct that has been found to be in contravention of Section 3 of the Competition Act.

Section 3 pertains to anti-competitive agreements.

The OMCs -- Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd -- had invited quotations from alcohol manufacturers for supply of ethanol through a joint tender in January 2013.

"While imposing penalties, the Commission applied the principle of relevant turnover and based the penalties on the revenue generated by the sugar mills from sale of ethanol only," an official statement said.

On sugar mills, the penalty has been imposed by the Competition Commission of India (CCI) at an interest of 7 per cent of their average relevant turnover. For the associations, the fine is 10 per cent of their average receipts "keeping in view the key role they played in facilitating bid rigging".

"The Commission in its order noted that the bidders through their impugned conduct have contravened the provisions of... the (Competition) Act by acting in a collusive and concerted manner which has eliminated and lessened the competition besides manipulating the bidding process in respect of the impugned tender floated by OMCs.

"The bidders who participated in respect of the depots located in UP, Gujarat and Andhra Pradesh in response to the joint tender floated by OMCs, were found to have acted in a concerted and collusive manner in submitting their bids," the statement said.

The CCI order has come on separate complaints filed by India Glycols, Ester India Chemicals, Jubilant Life Sciences, A B Sugars, Wave Distilleries and Breweries and Lords Distillery.

Among others, it was alleged that the suppliers of ethanol - comprising mainly of sugar mills - had contravened the provisions of Section 3 of the Competition Act by rigging bids submitted pursuant to the January 2013 tender, by quoting an exorbitant price for supply of ethanol to OMCs.