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CCI clears PSU oil firms of cartelisation charges

Anti-trust regulator 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,' 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 biodiesel 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 Policy which became effective from 1 January 2006. 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.
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