Libertatem Magazine

Real Regulatory Body: PNGRB or CCI

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[mks_dropcap style=”letter” size=”52″ bg_color=”#ffffff” txt_color=”#1e73be”]R[/mks_dropcap]egulatory reforms have played vital role in this larger and upcoming economy. The enterprises in developing countries face the liberalization of markets. Guiding these, not only the regulatory process but also competition law and policy have been among those challenges. During 1980s – 1990s, several countries started processing economic liberalization and adopted policies of privatization, trade liberalization and deregulation. Countries face different outcomes by the virtue of different mechanism in competition matters. Such different mechanism create not only the confusions from stake holder’s perspective but also lead to forum shopping such differences reflects the absence of clearly defined jurisdictions in the matters of regulation, leaving the interface and turf between two authorities in handling matters related to competition.

Petroleum Based Sectoral Regulations

This industry is one of the upcoming and complete industries of Indian economy absorbing the extremes of monopoly and the already prevailing competition. It is not a hidden observation that the flows in Petroleum Industry are extremely large when compared to the extraction of petroleum from underground reserves. Petrol and high speed diesel oil are the reasons of running motor vehicles. Both these fuels are derived from the mineral oil. This very fact brings in the third part of petroleum industry that is ‘downstream’ which is responsible for the distribution of products. The downstream sector is further sub-divided in four categories:- 1)Exploration and production, 2) Refining and marketing, 3) Transportation and marketing, 4)Crude oil and petroleum products pipelines. Focusing on downstream sector, PNGRB (Petroleum and Natural Gas Regulatory Board) act, 2006. This board is vested with statutory genesis that gives the independency to this regulatory board. The objective of this act is not only the regulation of anti-competitive behavior but also to govern the policies involved in its pricing. In a landmark case by the appellate tribunal of electricity, the role of PNGRB was brilliantly examined in the presence of government’s regulatory bodies. The judgment in this case established that section 11 and section 12 of PNGRB shall execute its duties and take measures to foster the trade practices interfaced with competition with other entities. Section 2 (X) of the PNGRB act has excluded the government to fix the prices and has provided the entities to function the price. The competition authority has been vested with the rights for providing expert reports and comments to the specific regulator. The competition authority acts as a principal when it comes to enforcing and guide competition issues in the market. Indian regulators find it favorable to exclude competition authority with the retained responsibility of decisive nature.

The conflicts occur in between sectoral regulator and competition authorities for the purpose of regulating a sector which could be implemented in numerous ways, though the mechanism under Section 21 of the competition act and the MoUs signed between Competition commission of India and the regulators also amounts as one of the ways to regulate market. The high going prices of oil and Gas have inferred the expectations of increased range of investments in the field of exploration and production with the challenges occurring due to service costs, difficulty in logistic terrain and manpower. The competition authority has always assessed to the lawfulness of the conduct by the virtue of private parties that brings in various issues before the authority for the purpose of modifying the unlawful conducts in the market. These irregularities in the market prohibit the activities like the price fixation, bid rigging and the things not to do by the market agents. The specific sectoral regulators in such cases have ex ante powers. These discretionary powers bring the concurrent turf wars between the Competition Commission of India and specific sectoral regulations hindering the regulations in market. The competition Commission of India and sector specific regulations have been capable in showing the distinctive challenges in competition law, and both the regulatory can be complimentary.

The question arises that, in case of any interface, which regulatory body shall come in picture to resolve it that causes a source of tension. The solution to this conflict of interface could be that the sector specific regulations shall identify the ex ante problems and address such issues even before the problem incurs whereas the CCI addresses the ex post problems in the prevailing marketing condition. In the instant case that shows the conflict between the two irregularities, but in terms of legal interpretations and view, we shall find that there is no overlapping between the two regulatory bodies.

Observing the origin of the source of conflict, Section 18 of the competition act and PNGRB’s preamble inscribe the fundamental duty of the competition to sustain the economy of India and to curb practices that affects competition adversely and to protect the interest of the consumers. But, it has always remained numb with respect to sector specific regulation. With Section 60 of the competition act, the CCI has a primary law in consistent with other acts in force. Adding to it, Section 62 of the act says to work in conjunction with other statutes. On other hand, the preamble of PNGRB gives the board, the power to regulate refining, processing, storage and transportation, marketing, distribution and sale of petroleum consumer’s interest. Therefore, with the already existing Competition act, the PNGRB shall promote the market’s competency. If given a glance to the intention of the legislature, with the general rule that the later intention of the legislature should prevail over n earlier enactment. Section 11 and section 12 of the PNGRB Act shall be responsible to maintain fair trade practices in competitive market. Ironically, the legislation does not define as to what shall be constituted as unfair trading in the market. This results as marketing PNGRB body with no tooth to tackle competition.

Findings and Conclusions:

Endorsing Dr. Rangarajan’s view, to entertain new discovery and invention, there has to be a body familiar with the idea of the discovery to govern it. Since, the other regulatory body that has no idea about the technicality involved cannot regulate such upcoming impacts of discovery.

With this article, I would present three major findings,

  1. Sectoral regulations are the need.
  2. Co-existence of competition act and PNGRB.
  3. Over lapping of jurisdiction.

With these findings, I would recommend that the Commission shall pitch in with the competition issues and not intend to gain the regulatory objectives. This interface is unique in itself. If addressed correctly without avoiding forum shopping shall propagate the new discoveries to lay its advantages impact in India and in the interest of consumers. In the past decades, our economy has absorbed a spurt in massive growth. These observations reflect that the completion regulation and sector specific regulation shall work in conjunction to give a complimentary advancement and aim to cultivate consumer’s welfare.

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