Oil firms' togetherness on pricing a concern for CCI

Are oil marketing companies acting in concert on prices to deny consumers a little benefit they could enjoy from a competitive environment? According to a report in the Business Standard, they could be, as they hold even their press conferences together to announce price revisions.

“The coordinated approach of OMCs (oil marketing companies) is not only impacting consumer interest, it is also likely to create entry barriers for private players in the sector,” a senior official from the Competition Commission of India has been quoted as saying in the report.

[caption id=“attachment_343092” align=“alignleft” width=“380” caption=“According to the competition watchdog, the deregulation of petrol prices was aimed at encouraging competition . Reuters”] [/caption]

Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) had announced a sharp upward revision of around Rs 7.5 last month. Later on they reduced the prices by around Rs 2. Both the announcements were made at joint press conferences.

According to the competition watchdog, the deregulation of petrol prices was aimed at encouraging competition and if the companies are acting together in matters such as pricing, the very principle of market-linked pricing is defeated.

The moot question is whether it would make any difference to consumers if these companies -who have the same promoter, the government- compete?

Very unlikely. The beneficiaries, if any, are going to be their private counterparts. And, interestingly, the Competition Commission itself is a government body.

“We will write to them about it soon,” the official has been quoted as saying in the report.

If it is serious and goes ahead, there will surely be something to watch.