Hearing of petroleum product pricing by Petroleum and Natural Gas Regulatory Board (PNGRB)

Oil regulator to hear case on fuel pricing
Business Standard, New Delhi, April 13, 2010

The Petroleum and Natural Gas Regulatory Board (PNGRB) will resume
hearing the case on petroleum product pricing between private oil
companies and government oil marketing companies (OMCs).

Private companies, including Reliance Industries, Essar Oil and Shell
India had filed a petition before PNGRB against the OMCs Indian Oil
Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and
Hindustan Petroleum Corporation Limited (HPCL) alleging that they had
indulged in "predatory pricing" in sale of transport fuels.

The Supreme Court last month permitted the downstream oil sector
regulator to proceed with the case while asking it not to pass a final
order. "The Board is likely to resume hearing of the case by the month
end as the Supreme Court has allowed it to proceed," said a Board
official.

The private companies had appealed to the Board to levy a penalty on
the government-promoted companies for the losses incurred by them. The
government companies sell petrol and diesel at cheaper rates and
control over 90 per cent of the market. Public sector oil marketing
companies, led by IOC, however, approached the Appellate Tribunal for
Electricity (Aptel), challenging the authority of the Board to decide
a petition by private oil companies last year.

Subsequently, Aptel upheld the Board's power to adjudicate the matter.
Aptel also asked the government to clarify its stand on pricing of
petroleum products since the OMCs told Aptel that the pricing of
petroleum products was a policy matter decided at the highest
government level and is beyond their control. However, even before the
Board could start proceedings, IOC filed a petition at the Supreme
Court against Aptel's order. While admitting the petition, Supreme
Court said the Board could proceed with the hearing.

The government determines prices of petrol and diesel even if it means
losses for the OMCs. The loss is made up by government bonds and
discounts by oil producers. The private oil marketing companies,
however, are not provided any such compensation and had to shut their
retail operations when crude oil prices rallied to three digits,
touching a high of $147 a barrel in July 2008.

Although the situation has improved, with crude oil prices hovering
around $86-87 a barrel, private companies are adopting a cautious
approach. While Essar has opened all its 1,339 outlets, Reliance is
just operating 600 of its 1,430 outlets.