Filed
by: M/s Royal Energy Limited, New Era
Mills Compound, Mogul Lane, Matunga (W), Mumbai – 400016
Against: Oil (Marketing) Companies (OMC)
Allegations:
It is observed that the said case
was under investigation before the erstwhile office of DG&IR and after the
repeal of the MRTP Act, the said complaint was transferred to CCI under Section
66 of the Act. The informant has alleged that the bio-diesel manufacturers have
been restricted to supply bio-diesel only to authorized oil marketing companies
(OMC) and thus sale in open market was prohibited by the Policy of Ministry of
Petroleum & Natural Gas (P&NG). Further, the OMCs are fixing uniform
purchase price of bio-diesel which is lower than the production cost to such
manufacturers. It is therefore, alleged that such situation has created a
monopsonic market wherein the OMCs are fixing price of bio-diesel in a concerted
manner in violation of Section 3 and 4 of the Competition Act, 2002.
DG
Report:
It is observed that there are only
13 bio-diesel manufacturers as submitted by Bio-Diesel Manufacturers
Association and the total production is insignificant. It is observed that the
National Policy of Bio-Diesel and the Bio-Diesel Purchase Policy of the Govt.
of India has laid out the complete dynamics of operation of the production and
marketing of the bio-diesel in India. The policy clearly lays down that the
bio-diesel can be sold only to OMCs who are required to market by blending it
with petroleum-diesel in prescribed ratio. Essentially the said policy
prescribes the manner of manufacturing, storage, distribution and marketing and
there every facet of this market is governed by the Policy decision of the
Govt. the market analysis there shows that it is Govt. controlled where there
is little scope of any market forces to operate independently in it.
Investigation has found that there has been no sale or purchase of bio-diesel
by the OMCs as far as the prices declared by them. Examination of the details
of the price fixing shows that the price of bio-diesel has been fixed on the
basis of the National Bio-Diesel Policy (NBP) and Bio-Diesel Purchase Policy
(BPP). It is noticed that pare 4.2(vi) of BPP and para 5.11 and 5.12 of NBP has
described the methodology of fixing purchase price of Bio-diesel by the OMCs.
The purchase price of Bio-diesel is
fixed on the basis of ex-storage point price of High Speed Diesel (HSD) and since
price of HSD is fixed by the Govt. the fixation of the bio-diesel price is done
on similar lines by OMCs. Based on BPP, NBP, and executive statements of OMCs,
it is learnt that purchase price of Bio-diesel are not independently determined
and are essentially being fixed on the basis of guidelines / policies of the
Ministry of P&NG (MoP&NG), and Ministry of New & Renewable Energy
(MNRE), Govt. of India . It is primarily on this predetermined methodology of
fixing diesel price as per the Govt. policy that the OMCs have declared uniform
purchase price of bio-diesel in the relevant period in question. The OMCs have
so far been acting as non-market entities as far as the procurement, blending
and usage of bio-diesel are concerned as their activities have remained limited
to declaring the purchase price of Bio-diesel at periodic intervals, in
accordance with the policy decisions of the Govt. However, no sale / purchase
of bio-diesel has ever taken place so far at prices declared by OMCs. Ministry
of P&NG has also stated that the OMCs declare bio-diesel purchase price on
a no-profit no-loss basis.
Conviction
of DG:
Uniform purchase price of
Bio-diesel by the OMCs cannot be construed as a cartel conduct is only in
compliance to the provisions of BPP, NBP and Ministry of P&NG regarding the
fixation of uniform ex-storage point price of HSD and retail selling price of
diesel. Also the conduct does not result in unfair and discriminatory and hence
there is no violation of Section 3(3) and 4 of the competition Act, 2002.
My
views on the case:
The Bio-diesel Association of India
(BAI) has submitted that MoP&NG and MNRE have recognized their association.
It has also stated that not a single litre of bio-diesel (B100) has been sold
to the respective OMCs as per their purchase policy of Rs.25/- a litre since
2006. It is submitted that the price Rs.26.50/- per litre is not at all viable
for production of bio-diesel. At current prices of feedstock of vegetable oil
price derivatives, the cost of production of bio-diesel is Rs.49/-per liter. At
conservative minimum gross margin of 10%, the selling price will be Rs.54/-per
litre. According to BAI there has been an investment of Rs.2300 crores by the
industry in setting up of the bio-diesel processing facilities. At present the
capacity utilization of bio-diesel manufacturers has been less than 5%.
Bio-diesel is diesel substitute.
The specifications of bio-diesel are such that it can be mixed in any ratio
with petroleum diesel fuel. It requires very little or no engine modifications
up to 20% (B20) blend and minor modifications for higher percentage of blend.
The committees on the development of bio-fuels observe that bio-diesel is a
clean fuel and up to 20% blend can be used readily without engine modification
and it helps in reducing emissions. The US has adopted B20 (using Soyabean),
whereas EU has adopted B5-B15 blends (using sunflower and rapeseed). India has
found Jatropha Curcas and Pongamia Pinnata (Honge or Karanja) plants to be
suitable for the bio-diesel purposes.
At present price of diesel per
litre is Rs.42/- approximately in Delhi. Price of Bio-diesel with 10% mark up
to the manufacturers is Rs.54/- per litre. And if B20 is regularized, then;
80% of Petroleum diesel price per
litre is Rs.33.6/-
20% of bio-diesel price per litre
is Rs.10.8/-
Total Rs.44.4/-
Given capacity utilization of less
than 5%, the bio-diesel price is Rs.54/- per litre. At full capacity the price
per litre of bio-diesel will be sufficiently low so that blended fuel (P80 +
B20) will less than Rs.42/- is sufficient to make the Bio-diesel project to
roll through the economy.
Opposite parties cannot be infringed
for there seems to be no violation of Section 3 or 4 of the Competition Act,
2002. However, as a part of advocacy, CCI should recommend the MNRE and
MoP&NG the benefits and importance of Bio-Diesel and help Bio-fuel industry
flourish well. This will have international recognition for India, as this will
be a milestone step towards addressing global warming, climate change and other
environmental issues which contribute to sustainable development efforts by a
developing country like India.
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