2nd Dr. Paras Diwan Memorial Energy Law National Moot Court Competition 2012


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2nd DR. PARAS DIWAN MEMORIAL “ENERGY LAW” NATIONAL MOOT COURT COMPETITION, 2012 is scheduled to be organized at University of Petroleum & Energy Studies, Dehradun on 6th, 7th & 8th April 2012 before the Hon’ble Supreme Court of Indoi.

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2nd Dr. Paras Diwan Memorial Energy Law National Moot Court Competition 2012

  1. 1. 2nd Dr. PARAS DIWAN MEMORIAL “ENERGY LAW” NATIONAL MOOT COURT COMPETITION, 2012 Organized by: College of Legal Studies University of Petroleum & Energy Studies Bidholi Campus Dehradun (Uttarakhand) On 6th, 7th & 8th April 2012 MOOT PROBLEM Before the Hon’ble Supreme Court of Indoi eIn the matter of: 1. Government of Indoi through The Secretary, Ministry of Petroleum & Natural Gas he 2. Indoi Oil Corporation Ltd. 3. Hexxon Petroleum Corporation Ltd. 4. Bright Petroleum Corporation Ltd. ……………………………………..Appellants …………………………………….. vs. Retro Petroleum Ltd. …………………………………………. …….Respondent 1
  2. 2. 2nd Dr. PARAS DIWAN MEMORIAL “ENERGY LAW” NATIONAL MOOT COURT COMPETITION, 20121. Indoi is a country whose constitutional framework is similar to that of India.2. The advent of globalization has fuelled the demand for efficient, reliable and competitively priced energy supply for accelerating economic growth of developing countries like Indoi. Affordable energy directly contributes to reducing poverty, increasing p productivity and improving the quality of life. The strategy for energy development is an integral part of overall economic strategy.3. Indoi is the world’s fifth largest consumer of crude and petroleum products with product consumption growing by over 5% every year. The domestic production of crude oil and natural every gas not been increasing in tandem with the demand of petroleum products. Consequently, I Indoi’s independence an imported crude oil has been on a rise and its share of imports in its total consumption is around 80%. n4. Government of Indoi, constitutionally committed to cater the economic interest of the vulnerable , sections of the people, has a policy to provide them certain petroleum products like kerosene oil, gas and diesel on subsidized rates. Accordingly, to put on place an appropriate price mechanism for the petroleum products is one of the major concerns of the Ministry of Petroleum & Natural Ministry Gas (MoPNG) of the Government of Indoi. NG)5. During 1970s, when several oil companies were nationalized the Government of Indoi nationalized, introduced the Administered Pricing Mechanism (APM) which was a complex system of cross stered subsidization wherein prices of some petroleum products were kept much higher than what market-determined prices would have been. The surplus generated in this way was used to determined generated partially subsidize certain other petroleum products. The APM ensured a 12 percent post-tax post return to the oil companies. However, the APM also empowered the government to artificially decide upon prices of petroleum products, and thus pricing became a political rather than an products, economic decision. 2
  3. 3. 2nd Dr. PARAS DIWAN MEMORIAL “ENERGY LAW” NATIONAL MOOT COURT COMPETITION, 20126. The explosive growth of 1990,s required the Government of Indoi to call for funds from private and international investors. The ability of the oil companies to generate investible surpluses got reduced considerably by the APM which allowed returns on the depreciated net fixed assets. Accordingly, the Government of Indoi constituted a committee in 1995 to prepare the blue print for the deregulation and tariff reforms required in the oil sector. The Committee recommended dismantling of the APM for various reasons. These recommendations were approved by the Government in principle in September, 1997 and further action was started. T Government The appointed an “Expert Technical Group (ETG)” to study the phasing and tariff structure of the oil sector. The ETG recommended, inter alia, that there should be a phased deregulation of the oil sector spread over a period of four to five years, culminating in total deregulation by 1.4.2002 regulation and that the subsidies should be phased out gradually within acceptable limits which will be provided through the budget.7. Government of Indoi accepted the recommendation of ETG. MoPNG notified phased recommendations phase st dismantling of APM vide resolution no. P ling P-20012/29/97 dated 21 November, 1997. Thereafter, dismantling of APM for consumer pricing w.e.f. 1st April, 2002 was notified and private players were authorized to market the transportation fuel including HSD as per the guidelines contained in MoPNG resolution no. P 23015/1/2001 Mkt. Accordingly APM was completely dismantled P-23015/1/2001 st w.e.f 1 April 2002.8. Transportation fuel including High Speed Diesel (HSD) was being marketed by Indoi Oil Corporation Ltd. (IOCL), Hexxon Petroleu Corporation Ltd. (HPCL), and Bright Petroleum Petroleum Pet Corporation Ltd. (BPCL), hereinafter referred collectively as National Oil Marketing Companies , (NOMCs) till the private companies entered the field. NOMCs are public sector companies in ate which the Government of Indoi holds majority shares. ndoi9. The global scenario in the oil sector post 2004 witnessed steep increase in the price of crude oil.10. The Government of Indoi taking into consideration the adverse effect of increasing price of HSD on the common man and economically vulnerable section did not increase the domestic price of section, pri HSD in conformity with international prices. The government tacitly regulated and subsidized the domestic retail selling price of HSD which was lower than the market determined price.11. NOMCs suffered huge losses by selling HSD at subsidized price according to the policy of the Government of Indoi. The government compensated the loss thus suffered by NOMCs by issuing them Oil Bonds. 3
  4. 4. 2nd Dr. PARAS DIWAN MEMORIAL “ENERGY LAW” NATIONAL MOOT COURT COMPETITION, 201212. Retro Petroleum Limited (RPL) a private company, applied for and obtained the authorization (RPL), for marketing HSD in pursuance of resolution no. P.23015/1/2001 of the MoPNG. RPL invested heavily and set up several outlets for retail sale of HSD across the country under the legitimate expectation that the prices of HSD would be fixed by the marketing companies themsel themselves in consonance with the market determined price and, in consequence, it would be able to make ith profit from retail sales.13. The Government of Indoi, despite resolution no P 23015/1/2005- Mkt issued by the MoPNG, Mo continued to regulate the retail price of HSD. Consequently all market players i.e. NOMCs and nsequently RPL suffered losses by selling HSD at prices lower than the market determined prices. But whereas the losses suffered by NOMCs were compensated by issue of Oil Bonds as already stated, this benefit was not available to RPL.14. RPL suffered huge market revenue losses and had no option but to close most of their retail outlets selling HSD.15. The Government of Indoi has enacted Competition Act, 2002 with the objective to promote and ndoi sustain competition in the market to protect the interest of the consumers and ensure freedom of trade, to promote economic efficiency, to make markets work for the welfare and benefit of the consumers and to ensure fair and healthy competition. Competition Commission of Indoi (CCI) has been constituted under the provisions of the Competition Act to achieve the objectives of the said Act.16. The Government of Indoi also constituted a board named Petroleum and Natural Gas Regulatory Board (PNGRB) under the Petroleum and Natural Gas Regulatory Board Act, 2006 to regulate the refining , processing, storage, transportation, distribution, marketing and sale of petroleum and petroleum products and natural gas excluding production of crude oil and natural gas so as to protect the interest of consumers and entities engaged in specified activities relating to est petroleum, petroleum products and natural gas and to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to prom promote competitive market.17. RPL filed a complaint in the CCI against the Government of Indoi and NOMCs praying to omplaint restrain them from selling the HSD at regulated prices instead of selling at market determined em prices in accordance with the terms of the above resolution of the MoPNG. f 4
  5. 5. 2nd Dr. PARAS DIWAN MEMORIAL “ENERGY LAW” NATIONAL MOOT COURT COMPETITION, 2012 In the complaint, RPL complain that the acts of the respondents namely Government of Indoi complained and NOMCs amount to abuse of dominant position and the regulation of prices amount to indulging in predatory pricing for the purposes of the Competition Act, 2002. The CCI entertained the complaint and issued notice to the respondent.18. The NOMCs and the Government of Indoi appeared in pursuance of the notice by the CCI and raised the following preliminary objections: objections:- i. CCI has no jurisdiction to deal with the issues relating to regulation of prices of HSD, a petroleum product and the same falls within the jurisdiction of PNGRB. PNGRB. ii. The determination of issues relating to the contentions raised by RPL with regard to petroleum products is wit within the exclusive domain of PNGRB and not the CCI. RB iii. The regulation of prices of HSD is a policy matter of the Government and as such the same cannot be questioned b the CCI. annot by After hearing the parties, the CCI rejected all the above preliminary objections and held that the he CCI has jurisdiction to decide the complaint.19. Aggrieved by the above order o CCI, the NOMCs and Government of Indoi preferred as appeal of before the Competition App Appellate Tribunal (CAT) constituted under the provisions of the Competition Act. The appe ellants also filed an application before the CAT praying for interim ion stay of the proceedings in the CCI.20. CAT, after hearing the parties, dismissed the application to stay the proceedings in the CCI. However an interim order was passed directing the CCI to continue with the proceedings but not pass any final order till disposal of the appeal.21. In January 2012, CAT finally dismissed the appeal and held that CCI has the jurisdiction to entertain, enquire and decide the complaint.22. Aggrieved by the decision of CAT, the Government of Indoi and NOMCs (the appellants) moved the Hon’ble Supreme Court of Indoi and prayed for quashing the impugned order. The appellants have also filed an application seeking interim stay of the proceedings before CCI. 5