South Asia LPG Company penalized Rs 19.07 Cr for abuse of dominant position

Published: Jul 11, 2018

BY TIOLCorplaws News Service

NEW DELHI, JULY 11, 2018: THE Competition Commission of India today held the South Asia LPG Company Pvt. Ltd. (SALPG) to be guilty of abuse of dominant position for terminalling services at Visakhapatnam Port. In this regard, the competition watchdog imposed a penalty of Rs 19.07 crores on the company.

The case pertained to access to upstream LPG terminalling infrastructure at Vishakhapatnam Port. Such infrastructure comprises of several components such as unloading arms at the jetty, blender, heat exchanger and cavern (storage facility). Such infrastructure being operated by SALPG is used for handling imports of propane and butane and their blending into LPG. The East India Petroleum Pvt. Ltd. (EIPL) filed an information with CCI under Section 19(1)(a) of the Competition Act, 2002 (Act) alleging that while allowing it to use the blender, the SALPG has been insisting on mandatory use of cavern. This resulted inpaying significant charges to SALPG. The OMCs were thus not finding the LPG terminalling services offered by EIPL economically viable and were constrained to avail the terminalling services offered by the SALPG only. To address this, the EIPL first proposed to use the blender of SALPG and thereafter, take the output directly to the cross-country pipeline, bypassing the cavern. Since this was not agreeable to the SALPG which allowed bypass of cavern to the extent of 25% only, the EIPL proposed to install its own blender, and sought a tap-out and tap-in from the propane and butane lines to discharge blended LPG, bypassing the cavern. This was also not acceptable to the SALPG. Another proposal seeking tap-out from the propane and butane lines at jetty to EIPL own blender and construction of its own infrastructure between the blender and storage facility, was also refused by the SALPG. All this was alleged to be abuse of dominant position by SALPG.

The investigation by the Director General revealed that the SALPG enjoys dominant position in the market for upstream terminalling services at Visakhapatnam Port. Although the SALPG attempted to justify its conduct on grounds of safety & efficiency of business operations, the commission held such conduct to be in contravention of the provisions of Section 4 of the Act. A penalty of Rs 19.07 crores was also imposed on the SALPG for indulging into the anticompetitive conduct.Thereafter, the CCI directed that the SALPG would not insist mandatory use of its cavern and would allow bypass of cavern for both pre-mixed and blended LPG, without any restrictions.

The Commission further held that the SALPG would allow access to its competitors, potential as well as existing, to the terminalling infrastructure at Visakhapatnam Port, subject to compliance with all safety integrity and other requirements under applicable laws and regulations framed thereunder. Such an access should avoid additional cost burden on the SALPG, and the entity seeking access would bear the cost, if any, towards necessary changes to the existing infrastructure. Under this option also, SALPG would not insist on mandatory use of cavern and it would allow bypass of cavern, without any restriction. The SALPG would extend full cooperation for the study or audit undertaken by VPT in relation to the remedies ordered herein. Needless to say, the SALPG would not do anything raising rival's cost.