CCI - No Proof Of Rigging In Joint Tender Issued By Public Oil Marketing Companies For Procurement Of Ethanol For Blending In 2013

Previously, the Commission had found the Opposite Parties guilty of violating the provisions of the Competition Act, 2002, and imposed an aggregate penalty of Rs. 38 crores on September 18, 2018. However, this order of the Commission was set aside by the National Company Law Appellate Tribunal (NCLAT) on October 10, 2023, and the matter was remanded back to the Commission for a fresh hearing.

Background Facts

On 02.01.2013, the Government of India issued a notification mandating all oil marketing companies (OMCs) to sell ethanol-blended petrol to meet the government's goal of achieving 5% ethanol across the country to reduce the burden of crude oil imports.

Therefore, on 02.01.2013, a joint tender was issued by three PSU OMCs, namely Indian Oil Corporation Ltd. (IOCL), Bharat Petroleum Corporation Ltd. (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL), for the procurement of around 140 lakh kl of ethanol for 110 depots across the country for a period of three years.

The informant (Total 6, OP-1 to 6) claimed that the issue of a joint tender by the three OMCs is in itself violative of Section 3 of the Competition Act. Bidders, specifically those from the State of Uttar Pradesh, indulged in cartelization and bid-rigging in the tender, and sugar mills associations such as the Indian Sugar Mills Association (ISMA), National Federation of Co-operative Sugar Factories (NFCSF), and Ethanol Manufacturers Association (EMA) facilitated such cartelization.

On 18.09.2018, the Commission, in its final order, found 20 opposite parties, which included ISMA, EMA, 12 sugar mills from Uttar Pradesh, 4 sugar mills from Gujarat, and 2 sugar mills from Andhra Pradesh, guilty of violating the Competition Act, 2002, and imposed an aggregate penalty of Rs. 38 crores on them.

Further, the opposite parties challenged the order of the Commission before the NCLAT on the grounds that the CCI had not complied with the principles of natural justice. The NCLAT, in its order dated October 10, 2023, set aside the final order of the Commission and remanded the matter back to the Commission for a fresh hearing.

Observation by Commission

The Commission observed that the three public oil marketing companies (OMCs) are under the direct control of the Ministry of Petroleum and Natural Gas (MoPNG), Government of India, and they follow the Ministry's directions.

Further, Joint tendering for ethanol was implemented to achieve efficiencies and commercial benefits. The Ethanol Blending Programme (EBP) policy was intended to be a continuous process, and issuing separate tenders would have led to inefficiencies.

The Commission found no evidence that the OMCs attempted to manipulate the price or supply of ethanol. The total quantity of ethanol required is known due to government notifications, and it remains unchanged whether a single or multiple tenders are issued.

The Commission observed that from both an administrative and public benefit perspective, joint tendering provides better advantages than issuing separate tenders. Therefore, the Commission concluded that joint tendering did not adversely affect competition in the ethanol supply market.

The Commission held that the issuance of a joint tender, based on commercial and operational considerations and in alignment with the Government's directives, cannot be considered anti-competitive or a violation of Section 3(3) of the Competition Act.

Lastly, the Commission held that due to a lack of substantive evidence, it cannot be concluded that the opposite parties have violated the provisions of the Competition Act, 2002. Therefore, the Commission dismissed the complaint against the opposite parties.

Case – India Glycols Ltd. Versus Indian Sugar Mills Association & others A/w 5 Others

Citation - Case No. 21 of 2013 A/W 5 others

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