The battle between private oil companies and government oil marketing companies over petroleum product pricing is set to intensify.
The Appellate Tribunal for Electricity has admitted the OMCs' plea challenging the Petroleum and Natural Gas Regulatory Board's power to adjudicate on the matter.
In a hearing on April 9, APTEL, while admitting the case, directed the Board not to proceed with its hearing of the case till April 30, the next date for hearing at the tribunal.
Private companies including Reliance Industries, Essar Oil and Shell India had filed a petition against the OMCs -- Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation -- alleging that the latter indulged in "predatory pricing" in sale of transport fuels.
They had appealed to the Board to levy a penalty on the government-owned companies for the losses incurred.
IOC, the largest government OMC, approached the Delhi High Court challenging the Board's jurisdiction in the matter. The court held that APTEL was the designated authority under the Electricity Act to take up the matter.
"The pricing of petroleum products is a policy matter decided at the highest government level. We have no control over it. It is the government that fixes the price," argued the IOC counsel before APTEL. Upstream oil companies, including Oil and Natural Gas Corporation and Oil India Ltd, have also joined IOC as appellants.
The government regulates the prices of petrol and diesel that OMCs sell, even if it means the companies have to incur losses. These losses are made up by government bonds and discounts by oil producers.
The OMCs are estimated to have closed the last fiscal with under-recoveries of Rs 1,03,908 crore (Rs 1,039.08 billion). However, they have been compensated with Rs 70,967 crore (Rs 709.67 billion) in the form of government bonds, while another Rs 32,000 crore (Rs 320 billion) have been absorbed by the upstream companies.
The private oil marketing companies are not provided such compensation. In fact, they were forced to shut their retail operations early last year when crude oil prices rallied to touch three digits, reaching a high of $147 a barrel in July.
Even though the situation has changed now and crude oil prices have crashed to around $50 a barrel, private companies are adopting a cautious approach. While Essar has opened most if its 1,250 outlets, Reliance has decided not to open any of its 1,400 outlets until the government brings in a level playing field in the sector.
