Fair Trade Regulator Dismisses Complaints Against GAIL

Fair Trade Regulator Dismisses Complaints Against GAIL
New Delhi: Fair trade regulator CCI has rejected allegations that state-owned GAIL indulged in anti-competitive practices with regard to supply of gas to two Gujarat-based entities.

Complaints were filed by Gujarat Industries Power Company Ltd (GIPCL) and Gujarat State Fertilizers & Chemicals Ltd (GSFCL) -- both of which have gas sales agreements with GAIL.

For the two cases, Competition Commission of India (CCI) considered 'supply and distribution of natural gas (RLNG) to industrial consumers in Vadodara' as the relevant market.

In its order, CCI said it was unable to construe abusive conduct on the part of GAIL.

"Safeguarding commercial interest or invoking contractual clauses which were not unfair per se cannot be termed as unfair just because they are invoked by one of the parties to the contract," it said.

It was alleged that GAIL had imposed unfair and discriminatory terms and conditions in the agreements for supply of natural gas.

CCI said it is apparent that GAIL is supplying to the GIPCL and GSFCL which have their plants located in the city of Vadodara.

"... the Commission is of the view that in the absence of any other major player, that is natural gas supplier in the city of Vadodara, the opposite party prima facie appears to be dominant in the relevant market," the order said.

The regulator also noted that the gas sales agreements appear to have been entered into by the two companies with GAIL after thorough negotiations and discussions.

GAIL had proposed in December 2013 to reduce the quantity of natural gas to be supplied to GSFCL. However, the same was rejected by the latter stating that its plants are running to full capacity and there is no need for revision of existing RLNG contract, according to CCI.

"In such a scenario, if the opposite party has invoked 'pay for if not taken' liability under the gas sales agreement, it does not appear to be abusive.

"Further, in view of the fact that such liability was substantially reduced by the opposite party shows that the behaviour of the opposite party was rational and not arbitrary," the order said.

The agreements, related to which the complaints have been filed, were inked before Competition Act came into force in 2009.

However, considering that the agreements were signed for a 20-year-period, CCI decided to look into the complaints.

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