Anti-trust regulator, the Competition Commission of India (CCI) has cleared state-owned oil marketing firms — BPCL, HPCL, and IOC — of charges that they formed a cartel and fixed the price of bio-diesel, saying that they have not violated provisions of the competition law.
After considering a complaint from Royal Energy that the OMCs had collectively decided to procure bio-diesel at a lower price, the CCI said it found that since the price of diesel was under the control of the Government, PSU OMCs were not allowed to fix, determine and enhance the retail selling price of diesel on their own.
“The OMCs cannot be forced to buy bio-diesel at a price which is higher than the price of end product, that is, HSD in this case, as it would not be commercially viable,” the CCI said in an order.
“After taking into account the totality of circumstances and the constraints under which PSU OMCs are functioning, the Commission agrees...that the conduct of the OMCs in this case cannot be said to be anti-competitive,” it added.
Royal Energy had alleged that since its product was causing a threat to diesel supplied by IOC, BPCL and HPCL, they started informing their clients that they would be supplying bio-diesel blended petro-diesel to them directly.
It alleged, “As per purchase policy of OMCs, they were supposed to purchase bio-diesel at a pre-determined rate, which at the time of filing the information was Rs 26.50 per litre, while price of bio-diesel sold independently by the informant was Rs 31 per litre.
“Since the consumers were bound to purchase blended bio-diesel only from the OMCs, the bio-diesel manufacturers were per force to sell their product to OMCs at a rate lower than the cost of manufacturing.”
On the basis of a Planning Commission report, the Petroleum Ministry had formulated the Bio-Diesel Purchase (BPP) Policy which became effective from January 1, 2006.
Subsequently, the New and Renewable Energy Ministry formulated a policy under which the responsibility of storage, distribution and marketing of bio-fuels was to rest with OMCs.
According to the policy the Minimum Purchase Price for bio-diesel was to be determined by Bio-Fuel Steering Committee and National Bio-Fuel Coordination Committee by the OMCs and this would be linked to be prevailing retail price.
“Consequently, for procurement of bio-diesel the OMCs had to make a backward calculation to arrive at the maximum price which could be paid to bio-diesel manufacturers,” it noted.
However, the Commission observed, that even if an anti competitive conduct flows from any policy of the Government, “the Commission will still have jurisdiction to examine the impugned conduct any violation is found, suitable orders can be passed under Section 27 and 28 of the Act. The Competition Act, 2002 has not been made any exemption in this regard“.
Bio-diesel is a cleaner burning diesel fuel made from vegetable oil instead of petroleum. It is formulated to improve diesel engine performance and yet be non-toxic and biodegradable.