RIL moves CCI, alleges oil PSUs acting as cartel in ATF supply

The complaint has been filed under sections 3 and 4 of the Competition Act, which pertains to anti-competitive agreement and abuse of dominant position, respectively

Reliance Industries (RIL) has moved the Competition Commission of India (CCI) alleging state-owned oil firms Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have formed a cartel to supply aviation turbine fuel (ATF) to Air India, reports PTI.

According to official sources, RIL has filed a complaint stating that the government-owned oil marketing companies worked as a cartel while bidding for ATF supply to flag carrier Air India.

It is learnt that RIL wants to enter the business of jet fuel supply, which is in the hands state-owned oil marketing companies.

"The complaint has been filed under sections 3 and 4 of the Competition Act, which pertains to anti-competitive agreement and abuse of dominant position, respectively. The commission will consider the complaint by RIL in a week," a source said.

When contacted an RIL spokesperson said: "We do not wish to comment."

National Aviation Company of India (NACIL), that runs Air India, regularly floats tenders for supply of ATF.

RIL's move coincides with the widespread anticipation that the PSU oil firms will continue to act as a cartel while revising petrol prices every month in the free pricing regime, which looks set to kick in as early as this week.

Petrol prices were freed from government control last month, resulting in a Rs3.50 per litre rate hike in Delhi.

However, the modalities of subsequent retail price adjustments — in line with changes in crude — were left for the industry to decide.

Though diesel prices were raised by an ad-hoc Rs2 per litre, it continues to be under government control.

"It makes no sense for PSUs to compete among themselves if only petrol prices are being freed. Oil marketing companies (or state-run fuel retailers) will continue to coordinate on the pricing of petrol," said a top oil PSU executive.

IOC, BPCL and HPCL are likely to revise petrol prices every month on the basis of monthly average of crude oil prices.


Industry gives wish-list to decontrol sugar sector

With large sugar production expected in the ensuing 2010-11 crop year, the two key industry bodies opined that it was the appropriate time to decontrol the sugar sector

Seeking freedom from government control, the sugar industry today asked the Centre to purchase the sweetener from open market for supply through ration shops and end the monthly quota system for sale, reports PTI.

The Indian Sugar Mills Association (ISMA) and the National Federation of Co-operative Sugar Factories (NFCSF), the apex bodies, today submitted their wish-list to the food ministry — a day after food and agriculture minister Sharad Pawar said that the ministry would finalise its decontrol proposals in the next 10 days.

Under the levy system, mills are required to contribute 20% of their production to the government for sale under the public distribution scheme (PDS) at a price determined by the Centre generally lower than the market price.

"With large sugar production expected in the ensuing 2010-11 crop year, it would be the most appropriate time to decontrol the sugar sector," ISMA deputy director general M N Rao told reporters in New Delhi at a press briefing jointly addressed by ISMA and NFCSF officials.

The industry assured that decontrol would not lead to any rise in sugar prices.

The four-point proposal mooted by the industry includes doing away with monthly release mechanism, PDS sugar to be procured from the market, removal of sugar from the purview of the Essential Commodities Act and cane price to be fixed on the basis of realisation from sugar and its by-products.

Interestingly, the industry wants that the practice of reservation of cane area and distance norm between two mills should continue.

"Cane being a perishable raw material, assured supply of adequate cane within reasonable distance is necessary for the mutual benefit of mills and the growers," ISMA reasoned.

However, some differences appear in the industry over this issue with some mills demanding that there should be no reservation on sugarcane area, as this would lead to competition among mills for buying cane from farmers.

The food ministry fixes the monthly quota for sale in the open market as well as supply under PDS through release mechanism. Mills are required to take release order for exports as well.

On cane price, the sugar industry said that the rate should be fixed based on the realisation from sugar and its by-products instead of the current practise of setting rates accounting the cost of production and transport charges.

"For this, we suggest globally benchmarked price-sharing formula of 62% to cane farmers and the balance 38% to the sugar mills," it said.

ISMA and NFSCF said sugar should be removed from the purview of the Essential Commodities Act because the maximum quantity of sugar is consumed by bulk consumers and not by households. Due to this reason, the weightage of sugar in the wholesale price index (WPI) has also been reduced to 1.67% from 3.62% earlier, they added.

According to a study by A C Nielson, nearly 74% of sugar consumption is accounted by bulk commercial users of beverages and biscuit makers and the balance 26% by households, they said.

While freeing the sugar market, the government should do away with stock holding limits on bulk consumers, they added.

Suggesting a long-term import-export policy, the industry said government should allow import of only raw sugar in times of production shortage and "the policy should enable India emerge as reliable exporter of sugar in long term."

Besides, the duty structure on imports should be calibrated in a manner to ensure payment of competitive cane price to farmers vis-à-vis other crops so that the country is self-sufficient.

India, the world's second largest producer but the biggest consumer, is estimated to have sugar production of 19 million tonne in 2009-10 crop year (October-September) against the annual demand of 23 million tonne.


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