CCI Clears OMCs Of Anti-Competitive Conduct In Ethanol Joint Tender Case
Pranav B Prem
The Competition Commission of India (CCI), in its final order disposing of six clubbed matters, held that the joint tender issued by the Public Sector Undertaking Oil Marketing Companies (OMCs)—namely Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL)—for the procurement of ethanol did not amount to a contravention of the Competition Act, 2002.
The dispute arose from the joint tender issued by the three OMCs on 02.01.2013, following a Gazette Notification mandating 5% ethanol blending in petrol across the country under the Ethanol Blended Petrol (EBP) Programme. Several informants had filed complaints under Section 19(1)(a) of the Competition Act, alleging that the joint tendering process was anti-competitive. Allegations included price-fixing and bid-rigging by sugar mills, cartelisation through sugar industry associations, and claims that joint tendering by the OMCs restricted competition.
The tender in question was for procurement of around 140 lakh kilolitres of ethanol across 110 depots throughout the country for a period of three years. Bidders were required to quote both Basic Price (ex-factory) and Net Delivered Cost (inclusive of taxes, duties, and freight), with the award to be made depot-wise based on the lowest Net Delivered Cost (NDC). The L1 bidder for a location was to be called for negotiations and awarded the quantity based on their offered price.
The Commission observed that the Ethanol Blending Programme was initiated by the Government of India as a policy measure in 2002-03, but due to supply constraints, it could not be fully implemented. The joint tender was a direct result of the government's directives, aimed at achieving cost-effective procurement and operational efficiency.
The Director General (DG), after an extensive investigation including cross-examination of witnesses and supplementary inquiries, concluded that the OMCs had not engaged in anti-competitive conduct. The CCI agreed with this finding, noting that the OMCs were under the administrative control of the Ministry of Petroleum and Natural Gas (MoPNG), and their actions were aligned with governmental directions. The Commission also emphasized that the quantity of ethanol to be procured by OMCs was already determined by statutory notification and thus, the issuance of a joint tender did not impact competition in terms of limiting supply or price control.
The Commission categorically stated that, “the investigation has, therefore, not found any violation of provisions of Competition Act by OMCs in issuing a joint tender for procurement of Ethanol.” It also noted that there was no evidence of any attempt by the OMCs to fix prices or restrict supply either directly or indirectly.
While evaluating the entire tender mechanism, the Commission highlighted that the purpose of joint tendering was driven by commercial and operational considerations. Given the nature of the public policy involved and the need to ensure uniformity in ethanol procurement across the country, the joint action by the OMCs could not be seen as anti-competitive. According to the Commission, such conduct did not violate Section 3(3) of the Act, which deals with agreements that cause an appreciable adverse effect on competition. The Commission ultimately held that issuance of the joint tender did not lead to price coordination among bidders and could not be construed to have restricted market competition in any form.
The CCI concluded that the issuance of the joint tender by IOCL, BPCL, and HPCL for ethanol procurement was not violative of any provision under the Competition Act. It found no sufficient evidence to establish any contravention by the OMCs, and accordingly, the proceedings against them were dropped.
Cause Title: India Glycols Ltd. V. Indian Sugar Mills Association
Case No: Case No. 21 of 2013
Coram: Ms. Ravneet Kaur [Chairperson], Mr. Anil Agrawal [Member], Ms. Sweta Kakkad [Member], Mr. Deepak Anurag [Member]
