The investigative arm of the Competition Commission of India (CCI) has initiated a probe into suspected violation of competition laws in ethanol supply tenders floated by oil-marketing firms.
The director-general of investigations at the CCI is expected to serve notices to three state-owned oil marketing companies (OMCs) ?? Indian Oil, Bharat Petroleum and Hindustan Petroleum ? and a number of sugar manufacturers, who produce ethanol, sources privy to the matter told FE.
According to sources, dozens of ethanol suppliers are suspected to have indulged in anti-competitive practices by submitting similar/identical bids, which were in the range of Rs35-36 per litre, for supplying ethanol to the oil-marketing companies in response to a tender floated by Bharat Petroleum in January this year.
The matter was first reported by The Financial Express in March.
A joint tender on behalf of the three state-owned oil marketing companies was floated by Bharat Petroleum has also been questioned by the CCI, sources said.
CCI is already probing the three OMCs on the allegations of cartelisation in fixing the prices of petrol.
In the ethanol tender matter, sources said bidders have submitted prices on a kilo litre basis, which roughly works out at around Rs 35.99/litre for a clutch of bidders. Another bunch of bidders have submitted a price that works out to be Rs 36.89/litre.
Also, around over a dozen bidders from Uttar Pradesh have submitted identical or similar bid amount in the price point of around Rs40/litre, making it a fit case for collusive pricing and bid rigging that can now be probed by the CCI. Ethanol makers from Maharashtra have together quoted a price of around Rs40-41/litre.
On November 22 last year, the CCEA decided to link ethanol price with the market to make it attractive for producers of the cane byproduct and directed the petroleum ministry to issue a gazette notification for OMCs to implement the programme. Prior to the decision, OMCs used to float tenders to buy ethanol at a provisional price of R27 a litre, which producers said was at least 25% lower than the then market rate.
According to the terms of the tender document floated by Bharat Petroleum on January 2, all vendors are covered by the provisions of the Competition Act, 2002, and the company can disclose any anti-competitive information to the CCI. Sources in Bharat Petroleum said tendering process is a confidential matter, so any details related to pricing/bidding can not be shared.
Indefinite storage of ethanol has become a problem for the sugar industry.
Few months ago, the sugar industry had written to the petroleum minister through the Indian Sugar Mills Association (ISMA). It told the petroleum minister that the sugar industry is worried about the delay in finalisation of tenders by oil marketing companies as sugarcane crushing had then entered the last phase of the 2012-13 season.
In the letter, ISMA urged the petroleum minister Veerappa Moily to intervene so that the OMCs can finalise the tenders and the factories could begin supplies.
The blending programme was first approved by the cabinet committee on economic affairs way back in 2008 to reduce pollution, but it could not be implemented fully despite being mandatory, mainly due to the absence of a fixed pricing formula for ethanol. Ethanol is also used by the potable liquor industry and the chemical industry.
The chemical industry has already gone to the CCI alleging that the diversion of the limited supply of ethanol to OMCs will squeeze supply to the alcohol-based chemical industry.
Section 3 (3) of the Competition Act defines bid rigging. Experts in competition law said CCI itself terms bidding as a procedure intended to enable the procurement of goods or services on the most favourable terms and conditions which may be negated if the prospective bidders collude or act in concert.
