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INDIAN PETROLEUM INDUSTRY AND COMPETITION LAW


VIOLATIONS

Competition Law
Submitted by:

Chiranjib Rout

15040141016

Batch: 2015-20

Submitted to:

Prof. Shashank Kumar

Alliance School of Law


Alliance University, Bangalore
Date of Submission: 26/09/2
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CHAPTERISATION

1. INRTRODUCTION

1.1. Research Question


1.2. Hypothesis
1.3. Scope and nature
1.4. Research objective
1.5. Research Methodology
1.6. Literature Review
1.7. Overview

2. CHAPTER 2: -Administered Price Mechanism and its deficiency


2.1.Concept and Historical evolution
2.2.Post APM Petroleum Industry: Interference by The Government
3. CHAPTER 3: -Competition Issues Involved
3.1.The real beneficiary
3.2.Creation and Abuse of Dominant Position
3.3.Lack of Proper Regulatory Mechanisms
4. CHAPTER 4: - Kirit Parikh Report.
4.1.Brief Overview
4.2.Recommendations
5. CHAPTER5: - Porters Model
5.1.Assessment of Five Forces

6. Conclusion and Researcher’s Opinion


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Abstract

In lieu of economic growth petroleum can be considered as a commodity of immense


significance. In the 21st century no nation can survive without a source of energy and we talk
about most significant source of energy petroleum tops the list. Determination of the price of
the petroleum products has always been a debatable topic in every common mans daily life.
The conditions of the petroleum sector are not only a topic of discussion in a layman’s life but
also is a topic of discussion in the centre of parliament. The Indian petroleum sector is alleged
to violate the laws of competitions and practice anti-competitive methods. It is always argued
about the dominance of PSU’s in the petroleum sector do not allow the private competitors to
strive in a open and free market. Now the main question arises is that how the policies of the
government and the dominance of the PSU’s in the petroleum sector are creating an adverse
effect on the competition. Competition has always proved itself as a boon to the consumers and
its regulation has always proved that it is highly capable of boosting the economy of the nation.
Competition states itself helpful to the consumers by providing then quality products with
multiple substitute and thus the regulation helps the in ensuring that every citizen is capable of
reaching such products. This article will help to find out the policies that create an adverse
effect on the competition in the oil and petroleum sector and will also inspect and analyse the
possibility of survival of the private players in this sector.

KEYWORDS- Adverse Effect, Anti-Competitive, Dominance, Economic Growth, Psu


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INTRODUCTION

1.1 Research Question

This paper aims at discussing the impact of government policies on Competition in the Indian
Petroleum Industry. This paper will not only cover the concept of administered price
mechanism, its dismantling but will also cover the situation of private players in the market
and the government policies that affect the competition market.

This paper aims to analyse whether the government policies that affect competition adversely
in the petroleum sector and also, whether the PSUs with the backing of the government are
abusing their dominant market position in the market and what barriers do the new entrants
face while they enter the market in this sector.

1.2 Hypothesis

The government policies clearly favour the PSU’s through their policy making and due to this
situation the PSU’s abuse the dominant position in the petroleum sector that deny the access of
the private players in the petroleum sector creating barrier that adversely affect the competition
and deny the pro competition in the petroleum sector.

1.3 Scope and Nature

The research paper remains limited to the jurisdiction of the Indian government although there
have been brisk information about the Sherman act and various acts in the international regime.
This paper deals with the various policies formulated by the Indian government and analysation
remains limited to Indian petroleum industry.

1.4 Research Objectives

This paper aims at the analysation of the abuse of dominant position by the PSU in the
petroleum sector backed up by the government policies which destroy the sustainability of the
private companies in the sector. This research also penetrates into barriers against competition
that deny the access to the new entrants in the market recommending policies for their
existence.
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1.5 Research methodology

The methodology which has been taken in conducting the research work in this paper is
doctrinal as the work are mostly collected from primary sources such as Statutes, case laws and
the secondary sources comprising of the Articles, Newspapers Articles, and Reports.

1.6 Literature Review

Y. Chandra Sekhar, ‘Indian Oil Industry: Transition to Deregulation’, IUP

This book says about how the regulation sector runs parallel to the competition sector and states
the importance of the regulation of the policies in the petroleum sector , this book throws a
clear picture on the adverse effect of the regulation to the new entrants in the market. It states
how the policies and the regulation impact the customers aswell as the competitors .

Ali Asghar Sadeghi, ‘Challenges for sustainable development strategies in oil and gas
industries’12(1) ,(2017) ICBE

This article provides a comprehensive review of emerging technologies in addressing existing


and foreseen challenges in sustainable development in oil and gas industries, with the aim of
suggesting prime solutions for strategic planning attempts. In order to enable oil and gas
companies to measure and control risks and manage incidents, artificial intelligent technologies
in extended monitoring and supervising E&P operations is known to be an efficient prevention
strategy. Such tools not only aid in profitability of the oil and gas companies, but also increase
awareness of environment and climate change to act more responsibly

Bhattacharya, B. B., and Amita Batra. ‘Fuel Pricing Policy Reform in India: Implications
and Way Forward.’ EPW 44( 29 ), (2009)

This journal deals with the dynamic price of fuel and petroleum prices that affect the norman
consumers as well as the competitors in the petroleum market. This book says about the APM
and its dismantling and says that India has transversed a whole circle starting from APM to the
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deregulation of the market. It suggest new policies that will look for the benefit of the
consumers rather that recouping the losses.

PARIKH, KIRIT S. ‘The Logic of the Expert Group Report on Petroleum Prices’ EPW
45(20), (2010), 18-23.

This report says about the predetermination of prices of petroleum products . The ministry of
Petroleum and natural gases had set up an expert committee which aimed at providing a
tentative outline which induced an authoritative recommendation for the fixation of price of all
petroleum products. The price expectation was so that it was feasible over a wide range of
international rates. This committee also performed a task of analyzation of the effect of
government policies in the petroleum market

1.7 Overview

The growth of the economy is totally dependent upon the energy sector of a sovereign, as
energy sector plays one of the most significant role. Tracing down to the roots of the energy
and petroleum sector in India, it’s totally noticeable that it was being controlled by the
government. Thus, we can say that the government interference is the reason for India having
a poor share in the world’s oil, gas and petroleum product consumption. Some major lacuna’s
that can pe seen in the sector are the total dependence on the import of energy commodities
and negligible participations of private players in the petroleum market.

The Indian Government after the realisation of the various loopholes existing in the petroleum
sector has induced many steps for the improvisation of various mechanisms that will help in
the betterment of the status of the country in the mentioned sector. Various policies inclusive
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of Administered Price Mechanisms have been demolished.1 In addition to that the Indian
government have tried to diminish and obliviate the mechanisms that forbid the entry of the
new players in the petroleum industry which includes both upstream and downstream activities.
Thus, the deregulation of the energy and the petroleum sector was supposedly a step forward
to improvise the petroleum industry.

Tracing back in time which says the history about the Indian petroleum industry, one of the
most noticeable fact is that the total petroleum industry was largely dominated by Private
players prior to the era of independence, and the interference of the government in the
petroleum was only after the independence . In 1970, when the oil crisis had a grave impact on
the country which resulted in the nationalisation of international oil majors in the Indian
subcontinent .Immediate to the nationalisation the Administered price Mechanism was
introduced by the Oil Coordination Committee which thus assured the stabilisation of the price
of the oil throughout the country. APM was beneficial for the producers, refiners and marketers
as it compensated for the cost of operation and also helped in procuring a fair return on their
assets.

This paper not only aims at discussing the dissolution of the APM buts also aims at the various
government policies that violate the competition Law in the present market and specifies the
role of government in the market. Dissolution of the APM mechanism diminished the barriers
for the entry of the private players in the market of the transportation of the High-Speed Diesel
(HSD). The mere assumption of the private players that they could fix the rate of HSD resulted
in Large scale investments. However, the intervention of the government in this sector
continues, as the regulation of the Price of HSD and issuance of the bonds to the Private Sector
Undertakings is still done by the government

CHAPTER 2: ADMINSTRED PRICE MECHANISM AND ITS DEFICIENCIES

2.1 Concept and History

The recommendation Oil Pricing Committee induced the concept of the Administered Price
Mechanisms in the year 1977. The success of APM in that specific era was totally based on a
fact that all the foreign oil companies were under the control of the Indian government. The
recommendation that was given by the OPC was that the pricing of the petroleum products will

1
Government of India vide its Resolution No.224 dated (21 November 1997), dismantled the Administered
Price Mechanism, w.e.f. April 1st, 2002. <http://petroleum.nic.in/subsidy.htm>, accessed on 08/09/2019
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be totally dependent on the domestic cost of production. In addition to that, the prices of the
end products and the raw materials used should be predetermined on a steady basis.

Irrespective of the initial success of the mechanism of APM it had to be scooted out 2 of the
market due to various reasons like the blooming of the international market in the subcontinent
and negligible growth of the Indian economy. The energy and oil sector of a country is stated
as the backbone of the state, as it has linkage with almost every other sector which cannot be
neglected due to its strategic impact on every other commodity market. The oil policies of the
gulf countries changed, thus the concept of APM was scrapped out. The occasional boost of
the oil rates zoomed the world economy for that specific period. The rate of oil price remained
dynamic as it was totally based on the changes of the global crude oil rate with producers, and
retailers inclusive of the add-ons of the taxes induced by the government in the deregulated
system , thus administering the oil prices on everyday basis was totally un viable.

2.2 POST APM PETROLEUM INDUSTRY: INTERFERENCE BY THE


GOVERNMENT

The changing world economy made it necessary for the government scrapping out the need of
APM. Through the mechanism of alteration of duties and taxes Indian government still
manages to manipulate the prices of the petroleum products. Whenever there is a significant
fall in the retail prices the state government scales up the sales tax to manipulate the price. For
instance, talking about the state policies of the Government of Maharashtra, in the year 2004
where a whooping increase of 40% of sales tax was incorporated stating it as the highest levy
in the entire country3.

The Indian Government is not in compliance of striking down the subsidies that are provided
on petroleum products like LPG and kerosene completely. The Petroleum ministry of india
have prima facie stated4 that direct transfer of price is burden on household sector by
dismantling the subsidy is totally unfeasible and unfair. Furthermore, the mere implications of
this policy will result in price control by the government irrespective of scrapping of the

2
Ibid
3
Kaur Phulvinder , Petroleum Sector: Privatisation or Monopolisation? Chartered Financial Analyst, May 2004.
4
http://petroleum.nic.in/subsidy.htm.
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concept of APM thus the account of these products will be still maintained in the general budget
of the country

There will be significant price inconsistencies in various states which will have stress on the
consumers and adverse effects on in competition in the sector due to the lack of and proper
regulatory authority5.

Summarily, stating that the role of the government is still existent in manipulating the prices
of the petroleum even after dismantling of the APM in the country will not be incorrect as still
government has control over the activities that take place in the petroleum industry. The extent
to which the policies of the government are affecting the competition in the country still
remains a debatable topic and will be discussed in the later part of this paper.

Chapter 3: Competition Issue Involved

3.1 Real Beneficiary

Till the recent dates the regulation of the various sectors was done by the monopolies owned
by the Government. The initialization of liberation in India also initiated the participation of
the private players even in the petroleum industry.

Stating the earlier discussion where it is mentioned that the Indian Government used the
Administered Price Mechanism, which was a compound system of cross subsidization where
it was noticed that the government kept the prices of few products much higher than the market
determined prices. The suggested recommendation of a Expert Technical Group, enabled the
private players to enter the market of transportation inclusive of High Speed Diesel(HSD).

In order to promote competition in the Indian petroleum market, HSD was not only marketed
by public sectors oil companies like Bharat petroleum corporation ltd, Indian Oil Corporation
Ltd, Hindustan Petroleum Corporation Ltd, but also was marketed by the private company such
as Reliance Petroleum Ltd, Essar, Shell.

Reliance and all the other private players had a significant investment and had set up numerous
outlets for the retail sale of the HSD in the entire Indian subcontinent under the bona fide

5
Ministry of Petroleum & Natural Gas Resolution 2002. The resolution grants powers to the Government of
India to approve the scheme for marketing transportation fuels and provide authorisation in this regard.
http://petroleum.nic.in/gazette.pdf .
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intention that the fixation of the prices would be done by the marketing companies in harmony
with the pre-determined market price and as a result the private players will be successful in
making profit from the retail sales6.

Despite scrapping out of APM from the policies of the government, the government still
indulged in the regulation of the retail prices of the HSD7, resultant of this act were the huge
losses faced by the companies8. Wherein all the Public Sector Companies were issued oil bonds
by the government, the private sector companies were left isolated to deal with their loss on
their own. Oil bonds were issued to all the PSU’s as a compensation of the losses faced by
them for selling petroleum products at a lower price.9 Thus, this bond was only helpful to the
PSU’s to resuscitate the huge amount of losses suffered. However, the private players received
no such compensation against the losses suffered by them10.

Stating the petroleum sector as a mature industry, it is to be known it too follows the concept
of the survival of the fittest which means any such enormous industry will always try to keep
the best players in the market. The circumstances that the Indian government has made us
witness is a clear evidence that there is a looming threat to all the private players in the market
under the veil of ‘under-recovery’11.

3.2 CREATION OF DOMINANT POSITION AND ITS ABUSE

Talk about any economy competition has always proved itself to be a boon on the consumers.
The Competition Act ,2002 contemplates that all the anti -competitive practices that have an
adverse effect on competition which includes the abuse of the dominant position shall be
prohibited. On the dismantling of APM the Indian Government expected a consumer friendly
and pro- competition market in the sector of petroleum which will be possible when there are

6
Y Chandra Sekhar, ‘Indian Oil Industry: Transition to Deregulation’ICFAI University Press
7
Malik Debasis, ‘Dismantling APM: Progress and Prospects, Chartered Financial Analyst’, (2002)
8
P.K. Agarwal, ‘Urgent Need to get rid of Subsidies, The Energy and Resource Institution,’ (2006)
<://www.teriin.org/index.php?option=com_featurearticle&task=details&sid=688>, Last accessed 26/08/19
9
ibid
10
The Hindu, ‘Lossmaking PSUs to get Rs.12,000crore compensation’ (2008)
<http://www.thehindu.com/business/Economy/article80973.ece ,2012>
11
The term ‘Under Recovery’ is used to denote the ‘losses’ that the Public Sector companies have suffered in
the Petroleum Sector. The term is used by the Government of India and justification of issuing oil bonds lies in
these ‘under recoveries’
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no barriers to entry for the proper functioning of the private players in the market. Thus as the
conditions and the losses suffered by the private players in the market did not create a
favourable market for the mere existence of the private players.

All the PSU’s such as Bharat Petroleum Ltd, Hindustan Petroleum Corporation Ltd, Indian Oil
Corporation controlled the major and the significant marketing network thus the private players
were still dependant on these PSU’s for marketing12 .Moreover , setting up their own system
of networking in the sector was whoopingly expensive for the private players13 ,thus it is never
a cake walk for the private players to take on the PSU’s who were termed as state owned giants
and crave some portions of share for themselves. The private sector which is burdened already
is still trying to curb some impression, for instance the Reliance, which is a market leader in
petrochemical industry has acquired a stake of around 26% in IPCL. No government policies
have been stated helpful for the sustaining of the private players in the market14.To state briefly,
these conditions have resulted in the creation of Dominant position by the PSU in the energy
sector. Chapter II of the competition act 2002 states that ‘no enterprise shall abuse its dominant
position’15. The term dominant position can be referred as ‘position of strength, enjoyed by an
enterprise, in the relevant market which enables it to operate independently of the prevailing
market forces or affect its competitors or consumers or the relevant market in its favour’16. The
mere attainment of a dominant position in the market can be stated as a violation of the
competition law but well, its abuse can be stated as one.

The Brussels airport case is stated to be one of the landmark cases states about the legislation
provided discounts on landing fees favouring airlines which deal with immense amount of
crowd and passengers over the airlines that have less traffic17. The Belgian legislation
established the threshold such that the discounts only benefited Belgian public carrier which
was carrier based on the airport and was detrimental to other community carrier, which clearly
gave a favouring result only to the Belgian carrier over all other players in the market. Article

12
Supra Note. 3.
13
Ministry of Petroleum & Natural Gases Resolution, 2002
14
How Valuation of oil PSUs can rise, <http://business.rediff.com/column/2009/aug/24/guest-how-valuations-
of-oilpsus-can-rise.htm>
15
Section 4, Competition Act, 2002
16
Napp Pharmaceutical Holdings Ltd. v. Director General of Fair Trading, [2002] CAT 1; United Brands Co. &
United Brands Continental BV v. Competition Commission of India of European Communities, (1978) 1 CMLR
429, Van den Bergh Foods Ltd. v. The Competition Commission of India of European Communities [2003] ECR
II-4653
17
The Competition Commission of India Decision 95/364 of 28 June 1995 OJ, L 216 of 12 September 1995 pp.8-
14
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82(C)18 of the treaty was thought to be applied by the competition commission of India in cases
where “a undertaking in a dominant position gives preference to another undertaking from the
state or another undertaking which is pursuing the same general policy”19. This case states that
the state was acting through its intermediary, that is the Belgian airways was enjoying exclusive
right over the take-off and landing services, was giving ‘preferential treatment’ to a specific
undertaking i.e. the national public airline Sabena. Hence article 86 in combination with article
82(c) was applied by the competition commission of India.

The literal meaning which can be interpreted out of the section that the policies that are taken
up by the Indian government in the Indian petroleum industry goes totally against the access20
the petroleum industry by the private entities. Thus the proper analyzation of the government
policies are required to determine whether the government policies are adversely affecting the
competition21 in the country, thereby violating the provisions of the act or aiding the PSU to
recover the losses suffered by them due to the, now scraped out, APM.

3.3 LACK OF REGULATIONS AFFECTING COMPETITION IN THE MARKET

Delay in judicial and legislative proceedings is not a new concept in India. The ambiguities
and loopholes present in the legislation have been seemed to put much more impact on the
competition in an economy. The energy and the resources institution which took a survey
22
clearly stated that the investors who invest on a commodity expects neutral returns before
they think about any opportunities. thus, they must be assured with the inducement of more
favourable policies for a better investment. Stating about the lacuna in the government policies
relating to the determination of the prices, these policies have adversely affected the
competition as private players suffered a huge amount of loss due to their huge investment in
the petroleum sector.

The most critical element in the energy regulation sector is pricing. This is because of the cost
reflective tariffs make the operators viable for maintenance, expansion and modernization of
the services and facilities. The regulatory framework in order to improve competition and
reduce impediments to financial viability of energy provisions, should allow the utilities to

18
Treaty on the Functioning of the European Union
19
CCI v. SAIL, (2010) 10 SCC 744
20
Section 4(1)(c), Competition Act, 2002
21
Section 19(3), Competition Act, 2002. This section provides that the ‘agreement’ either creates barriers to
new entrants in the market, drives out existing competition, or forecloses the competition by hindering entry
into the market in order to prove the agreement was anti-competitive
22
Competition in India’s Energy Sector, Final Report, (2007)
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charge tariffs which should be inclusive of underlying costs23. Talking about the Indian context
where we have seen the reduction in tariff rationalization in the electricity sector, but there are
still loopholes and imperfections present in the administrative control over price in oil, coal
and gas sector. It is evident that authoritative control over the fuel input is directly proportional
to the competition in the electricity sector. In recent years, there have been a significant increase
in recognition for the need cost reflective pricing all across the petroleum and energy sector.

CHAPTER 4: THE KIRIT PARIKH COMMITTEE REPORT

4.1 Brief Overview

The ministry of Petroleum and natural gases had set up an expert committee which aimed at
providing a tentative outline which induced an authoritative recommendation for the fixation
of price of all petroleum products. The price expectation was so that it was feasible over a wide
range of international rates. This committee also performed a task of analyzation of the effect
of government policies in the petroleum market.

The reports of this committee depict that ,the policy of providing subsidies on major oil
products by the government was led to stressed government finance , the depreciation of flow
of cash surplus of upstream public oil companies that restricted the ability for the exploration
of domestic and foreign acquisition was also witnessed24.

This report introduced undesirable distortions which was caused by price control, subsidies and
taxes. For instance, the high rate of excise taxes on petrol make the consumer substitute the use
of petrol cars to the diesel cars. Reduced prices of diesel depreciate the incentive to shift freight
movement from trucks to railways, because the consumption is 4 times less for every kilometre
of freight.

In addition to that, pricing control also restricts the competition. A numerous oil marketing
company such as, Reliance Industries, Shell Petroleum, Essar oil which were not included in
the subsidy sharing withdrew their retail marketing business across the country.

This report was also dealing with few important questions raised on the government policies
showing adversable effects on competition and the unwanted government intervention. Tis
very report systematically in an unbiased manner deals with the process to find a viable policy

23
Ibid.
24
Report of the Expert Group on a Viable and Sustainable System of Pricing of Petroleum Products,
Government of India 2012
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which will not only reduce the fiscal burden on the government but also will benefit the
customer to a great extent.

4.2 RECOMMENDATIONS

There have been few suggested recommendations by the Kirit Parikh report which tend to
improve the conditions of the petroleum market in India. This committee has a detailed report
of all the government policies in India. Primarily the committee gave a suggestion of having a
long-term pricing strategy they will work over the internal oil prices too, thus the strategy
formed should reduce the fiscal burden on the government. The committee also recommended
that the policy so formed will also help in promoting pro – competition in the domestic oil
market.

One of the most important recommendation of the committee is about the predetermination of
the prices of petrol and diesel at both the retail and refinery level25. The repost also recommends
on higher excise taxes on the diesel vehicle owners and also recommends that’s the
consumption trends state that there should be no subsidy on diesel.

This report also states about creating an environment in the sector that will be viable for the
private players to exist in order to incorporate this the ‘under-recovery ‘must be dealt with by
proper mechanism and the compensation of the losses should be given not only to the PSU’s
but also to the Private players in the market. The committee suggested that there should be
reduction of allocation of kerosene periodically and increase in price of kerosene and domestic
LPG so that the losses can be recovered, and subsidy can be curtailed.

The committee suggests that, market determined price for both petroleum and petrochemical
products would be the most viable option which will give both the public and private
participants same platform to compete increasing the level of competition in this sector.

CHAPTER 4: Porters Model

4.1 Assessment of Five forces

Porters five forces framework26 depicts that the competition in any sector depends on these five
points: -

25
ibid
26
Brandenburger, Adam. ‘Porter's Added Value: High Indeed!’ The Academy of Management
Executive (1993-2005), 16 (2), 2002, pp. 58–60. JSTOR, <www.jstor.org/stable/4165841>. Last
accessed 20/8/19
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 Threat to new errant


 Power of suppliers
 Threat of substitutes
 Power of buyers
 Rivalry among the firms in industry

However, the success of company in the specific sector totally depends on how well the
company is connected to the sector and the infrastructure the industry has. The structure of the
industry drives in competition and profitability. In order to reveal the roots of an industry’s
current profitability and anticipate future trends, a company must understand the underlying
causes of the five competitive forces.

1. Threat of Potential entrants- Porter indicates that with the entry of new entrants their
new capacity of desire to gain market share is also seen. The incoming of the new
entrants pressurizes on the costs, prices and rate of investments that is necessary to
compete. Porter suggests the entry depends on two factors 1- the height of the entry
barrier,2-incumbents.

According to Jones et al. (1978) the major barriers to entry in the oil and gas industry are:
1. Patents

2. Large capital requirements

3. Economies of scale

4. Governments regulations

5. Product differentiation

6. Predatory behaviour by cartels

7. Ownership of resource

Porter says that there are the barriers to the new entrants in the market, government
regulations have influenced the level of competition to a great extent and some of the
government policies have shut down many of the new players in the market. Patents and
innovation of various technology to work play an important role in cost reduction and
differentiation. Natural resources play the biggest barrier to entry as new entrants must have
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the secure and competitive resource to risk entry into the industry as rivals must acquire a
comparable amount of secured resources (oil and/or gas) to compete.

2. Threat of Substitute- Porter draws a line of difference between rivalry and substitution
and says that rivalry means the competition between the two parties providing the
similar product while substitution refers to the products that are not in similar market
but can be replaced by the other when required. Substitutes affect the industry through
limiting its anticipated profit by placing a ceiling on price.
Major oil and gas companies are now aiming at an alternative fuel resource to make it
a possible substitute. For instance, in the year 2009 Total formed a partnership with
GEVO which was a US market giant developing transportation biofuels and chemicals.
The substitution happens only when there is an attractive price trade off to the products
of the industry.
3. Power of suppliers- This concept shows the power of the suppliers and how their
behaviour can affect the competition in the market through charging higher prices,
limiting production. These two elements were clearly seen in the oil crisis when
embargos by the oil producing countries led to the reduction of the supply of the oil and
thus led to a immense shortage resulting in the drastic increase in the price of a barrel
of oil from $2.7 -$11.2 during the period the period from 1973 tom1974.
4. Power of buyers- The powerful buyers have a capability to reduce prices, demand better
quality or more service play industry participants off against each other, at the expense
of industry profitability. Large and major oil companies have outsourced their field
operation to many gas and oil companies, this is because oil companies are in much
powerful position to bargain prices and demand better quality and additional service.
The oil and gas companies to gain much more market power, to reduce or share risk
and acquire or share information indulge into joint ventures due to highly competitive
market.
5. Rivalry among Competitors-High rivalry between the current competitors can
determine the profit and create an adverse effect on the intensity of competition. All the
major gas and oil companies have almost equal size and power with similar
infrastructure which increases the rate of rivalry and can manifest itself ina price war if
the competitor tries to influence the cost and the prices in the market.
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CONCLUSION AND RESEARCHER’S OPINION

Over decades the Indian petroleum industry has gone variety of changes. The Indian petroleum
sector has trans versed a full circle as it was prior independence a deregulated sector then was
administered by the APM then again was deregulated.

This paper totally penetrates into the reasons behind the dismantling of the APM and the abuse
of dominance by the PSU destroying a sustainable environment for the new entrants in the
market. . The present situation has also been dealt with including the furore amongst common
masses due to the soaring price hikes in the petroleum products.

The main goal of this paper is to highlight and bring into notices the lacuna and a fallacy that
still exist in the Indian petroleum sector. The researcher would also like to state that the policy
of subsidising several petroleum products might ultimately result in anticompetitive practices
as this policy is adversely affecting competition as the new players are sustaining huge amount
of losses and are being swiped away from the sector as we can evidently see that many retail
outlets of RPL have been shut down.

The policy enacted by the government proves to be detrimental to the chances of the foreign
players to compete in the market, this will be gradually developing into a necessity as due to
the growing population and growing demand of petroleum products. Thus, it is now important
for the Indian petroleum industry to analyse the matter of violations in the petroleum industry
and investigate the position of the private as well as the PSU.

Another factor that needs to be focused on is that whether the concept of APM should be
brought back to action as now the prices of the petroleum products are skyrocketing and the
burden that the masses are exposed to is too much to handle. The government shall rather focus
on making policies that will decrease the levy of taxes on already suffering public than its
efforts to recoup the already sustained losses.
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Bibliography

Primary source

Sherman Anti-Trust Act 1890

Bare Act, Competition Act, 2002

Secondary Source

Books

Y. Chandra Sekhar, ‘Indian Oil Industry: Transition to Deregulation’, The ICFAI University
Press, 1.

Journals and Article


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Devangshu Dutta, ‘How valuations of oil PSUs can rise’(2008),


<http://business.rediff.com/column/2009/aug/24/guest-how-valuations-of-oil-psus-
canrise.htm>.

Vinod Kumar, ‘Oil Pool Account can redress petrol price burden’,
<http://www.boloji.com/index.cfm?md=Content&sd=Articles&ArticleID=5326>

RajKumar, ‘Justifying Unjustifiable Petrol Price Hike’,


<http://www.lawyersclubindia.com/forum/JUSTIFYING-UNJUSTIFIABLE-
PETROLPRICE-HIKE-30673.asp>

Robert Mabro, ‘The Energy Journal’13 (2 ), (1992), 1-17

Ali Asghar Sadeghi, ‘Challenges for sustainable development strategies in oil and gas
industries’(2018) ICBE

Williamson, Harold F., and Ralph Louis Andreano. ‘Integration and Competition in the Oil
Industry: A Review Article.’JPE 69 4 (1961): 381-85.

Robert L. Minckler, Albert C. Mattei, R. G. Follis, and Gilbert Palmer. ‘The Petroleum
Industry.’ TAJ 8, 4 (1952): 79-91.< http://www.jstor.org/stable/4468042.>

Bhattacharya, B. B., and Amita Batra. ‘Fuel Pricing Policy Reform in India: Implications and
Way Forward.’ EPW 44( 29 ), (2009)

PARIKH, KIRIT S. ‘The Logic of the Expert Group Report on Petroleum Prices’ EPW
45(20), (2010), 18-23.
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