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TMI Blog2019 (12) TMI 1689X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed, the users, i.e. OMCs could in that case decide on the choice to make for after weighing the cost and other relevant factors. In other words, it is for the customers to decide whether they would like to pay for use of the cavern or opt for higher vessel retention. It rightly observed that effective competition does not necessarily mean prevalence of the most efficient to the exclusion of relatively less efficient choices to consumers. Therefore, in the absence of capacity constraints to accommodate the services offered by EIPL, restraint on competition exerted by SALPG on the pretext of the former being less efficient, would not be justified. The bypass restriction imposed by SALPG is primary with a view to protect its commercial interest at a cost competition and the plea taken before the Commission was an after-thought. The Commission rightly held that SALPG requiring users to necessarily use the cavern and pay higher charges is an unfair imposition in provision of terminalling services; and is likely to discourage imports and restrict the services otherwise offered by the Informant. The impugned restriction on bypass of the cavern facility are in contravention of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30th December, 2011 under Section 26(1) of the Act, the Commission directed the Director General ('DG', for short) to cause an investigation into the matter. After a detailed investigation, the DG submitted his Investigation Report before the Commission on 30th November, 2012. 4. During the investigation, the DG examined dominance in the upstream terminalling service at 'Visakhapatnam Port' and 'SALPG' (one of the Appellant herein) was found to be the only player. However, though the Director General found that 'SALPG' (Appellant herein) is the only enterprise in the market for upstream terminalling service at Visakhapatnam Port and possessing 100% market share, it observed that SALPG does not enjoy dominant position. The DG observed that 'SALPG' has very limited ability to dictate its prices or alter the terms of providing services in the market. The DG further observed that 'SALPG' does not possess any power to prevent entry of Informant - EIPL into the upstream terminalling service market. It was also informed that the Informant - 'EIPL' has already applied for grant of permission from 'Visakhapatnam Port Trust (VPT) for laying a parallel infrastructure. As such, both it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustan Petroleum Corporation Limited' (HPCL)' and 'Visakhapatnam Port Trust' on terminalling infrastructure, safety aspects, relevant market, feasibility of tap- in and tap-out and bypass of cavern and pricing of terminalling services. 'EIPL' (Informant) and 'SALPG' (Appellant herein) filed their response. The 'Oil Marketing Companies' namely 'IOCL', 'BPCL', 'HPCL' and 'VPL' submitted their response and they were heard by the Commission. 10. Based on the material on record, including submissions of the parties and third parties, the Commission did not find sufficient reason to agree with the finding of the DG on the aspects of relevant market, dominance and abuse of dominant position and directed the parties to respond to the observations of the Commission as was made by order dated 10th January, 2018. The parties were directed to file their reply affidavits to the observations of the Commission and appear for an oral hearing. 'EIPL' (Informant) and 'SALPG' (Appellant) both filed their submissions on 20th February, 2018. They were heard by the Commission on 19th April, 2018. On analysis of the evidence and other relevant material, the Commission held that the restriction imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shall bear the cost, if any, towards necessary changes to the existing infrastructure. Under this option also, SALPG shall not insist on mandatory use of cavern and it shall allow bypass of cavern, without any restriction. SALPG shall extend full cooperation for the study/audit undertaken by VPT in relation to the remedies ordered herein. Needless to say, SALPG shall not do anything raising rival's cost." 12. So far as the imposition of penalty is concerned on 'SALPG', after thoughtful consideration the stand taken into consideration the decision of the Hon'ble Supreme Court in 'Excel Crop care Limited vs. Competition Commission of India and Anr.' the Commission imposed penalty of Rs. 19,20,70,000/- (Rupees Nineteen Crores Twenty Lakhs and Seventy Thousand only) upon 'SALPG' (one of the Appellant herein) for infringing the provisions of Section 4 of the Act. 13. The case relates access to LPG terminalling infrastructure at Visakhapatnam Port comprising of unloading arms at the jetty, blender heat exchanger and cavern. Over the years, import of pre-mixed LPG has reduced and no pre-mixed LPG was imported since 2011-12. Instead of pre-mixed LPG, basic gas namely ''Propane'' and ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Butane'' lines to take gases for mixing in its blender and, thereafter discharge the blended output back into the 'SALPG' pipelines through a tap-in. It was also not acceptable to 'SALPG'. In this background 'EIPL' had to offer another revised proposal seeking tap-out from the ''Propane'' and ''Butane'' lines at jetty to its own blender and construction of its own infrastructure between the blender and storage facility. However, it was not accepted by 'SALPG'. It was at this stage the 'EIPL' (Informant) filed application before the Commission, who after due investigation and enquiry answered against the Respondent ('SALPG'). CASE OF THE APPELLANT -- SOUTH ASIA LPG Company Private Limited -- (SALPG) 16. In the year 1997, HPCL laid down its 8km long cross-country pipeline with the technical capability of receiving either 'pre-mixed LPG' or ''Butane'' exclusively. The 'HPCL' pipeline (and the pump house) never had the technical specifications to handle ''Propane'' at low temperature. In fact, at that point of time as only 'pre-mixed LPG' or ''Butane'' was being imported at the Vizag port, there was no question of ''Propane'' being imported and hence, 'HPCL' never envisaged a situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts customers, the OMCs. 20. Sometime prior to 2010, 'IOCL' and 'BPCL' requested the Appellant for pumping 'pre-mixed LPG' and ''Butane'' directly into the HPCL pipeline bypassing the Cavern so that such 'pre-mixed LPG'/''Butane'' could be transported through tank trucks to reach end consumers. Such tank trucks facility was being provided by the Respondent. Even though bypass of the Cavern was never envisaged in the original design of the Appellant facility, the Appellant permitted 'IOCL' and 'BPCL' to use the bypass facility for transportation of only 'pre-mixed LPG' or ''Butane'' through the 'HPCL pipeline' for which it was appropriately rated and had the requisite technical specification. Till 2010-11 and 2015-16, 'pre-mixed LPG' and ''Butane'' were being imported at the Vizag Port respectively. 21. When the import of pre-mixed LPG virtually stopped from the year 2011-12, there was no possibility of permitting the direct pumping of blended LPG (i.e., pumping of refrigerated 'Propane' (at (-)45 degree) and ''Butane'' (at (-)5 degree) directly from the ship bypassing the Cavern into the 'HPCL' pipeline directly, as the same is not rated for taking 'Propane' even in small quantiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion should have sought technical views instead of adjudicating on highly technical issues itself without having the technical expertise to do so in the first place. 25. It was further submitted that the relevant geographical market is not the Vizag Port as it was demonstrated by OMC's planning chart that many other ports in addition to the Vizag Port were being used for unloading LPG in the country and supply from every port was being made to almost every corner of the country. A few examples from the chart have been shown by way of the following table. Sl. No. Receipt location Name of the port Amount of LPG planned to be supplied form port to receipt location 1. Bhitoni, Madhya Pradesh JNPT Mumbai 85,192 MT MLIF- Import Terminal (Mangalore) 9,127 MT Vizag Port 5,750 MT 2. Bhopal, Madhya Pradesh MILF-Import Terminal (Mangalore) 43,700MT JNPT-Mumbai 35,581MT Vizag Port 4,600 MT Aegis Import Terminal 13,356 MT 3. Chandrapur, Maharashtra MILF- Import Terminal (Mangalore) 43,296 MT Vizag port 9,523 MT 4. Cherlapally, Telangana Ennore-Import Terminal 24,830 MT JNPT Mumbai 5,750 MT MILF-Import Terminal Mangalore 6,265 MT TOIPL, Mangalore 3,835 MT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d go through the HPCL pipeline) whereas the 'HPCL pipeline' is only rated to take LPG at +10 degree to + 40 degree and hence, there was no question of abuse of dominance. Moreover, the Appellant has never denied access to its facility in entirety and has in fact provided bypass of pre-mixed LPG because it was technically feasible to do so and there was spare capacity available. SALPG objects to providing bypass of Cavern for blended LPG because of capacity and technical considerations. b. As the HPCL pipeline is the only mode of evacuation of LPG at the Vizag Port, the OMCs require the HPCL pipeline up to its 100% capacity for the discharge of gas from the Appellant's Cavern as the rate of unloading of gases from the ships into the Cavern is up to 1,000 MT/hour whereas the rate of unloading of gases from the ships directly into the HPCL pipeline (when the Cavern is bypassed) is only 200 to 250 MT/hour and hence, there is no spare capacity available to permit bypass of the Cavern to use the HPCL pipeline. c. HPCL has admitted that the Cavern mode is more efficient and less costly in comparison to the bypass mode. This is because during the Cavern mode the VLGCs are unloaded into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to highlight that the Respondent filed the complaint with the Commission in 2011 i.e. 8 years ago. In this much time, the Respondent could have replicated the facility twice over. Thus, the above clearly shows that the Respondent is seeking to free- ride on the Appellant's facility without wanting to make this investment itself. In this regard, the Appellant is relying upon the judgment of 'Oscar Bronner GmbH & Co. KG vs. Mediaprint Zeitungs and Zeitschriftenverlag GmbH & Co. KG & Others Case C-7/97, judgment of the Court (Sixth Chamber dated 26.11.1998) wherein the European Court of Justice, held that there is no per se rule within the aegis of the Competition Law framework which mandates interfering with a dominant undertaking's freedom to contract. The Appellant is also relying on 'Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP'', 2004 SCC Online US SC 2:540 US 398 (2004) wherein the US Supreme Court recognized the right of a trader or manufacturer engaged in an entirely private business to freely exercise his own independent discretion as to parties with who he will deal with. CASE OF THE HINDUSTAN PETROLEUM CORPORATION LTD. -- (HPCL) 30. Learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being aware of issues relating to safety of 'HPCL pipeline' owned and operated by the Appellant. It is settled law that the fundamental right of a citizen guaranteed under Article 19 (1)(g) is not absolute and no person has a fundamental right to insist upon the Government or any other individual for doing business with him. Reliance is placed on the decision of the Hon'ble Supreme Court in 'Krishnan Kakkanth Vs. Government of Kerala & Ors.' - 1997 (9) SCC 495. 33. It was stated that the Commission itself had directed appointment of an independent expert to give its opinion on the technical feasibility of the proposed modifications by its order dated 19.12.2012, and further categorically held in the impugned order that '...the commission has on record two conflicting reports, none of which can be regarded as an objective third party study.", therefore it is submitted that the Commission ought not to have proceeded to determine the technical feasibility and safety on the issue by itself, when admittedly it did not have the technical expertise to do so. 34. Learned counsel for the Appellant further contended that the conduct of the 'SALPG' cannot be said to be anti-competitive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that as per Engineers India Limited, the designer of the HPCL cross-country pipeline and the HPCL Operative Manual, the recommended operating temperature of the HPCL cross-country pipeline is +10 °C to +40 °C, although the fault temperature or the minimum design temperature is +1 °C. The HPCL manual also records that the operating temperature of the HPCL pipeline is +10 °C to +40 °C. The HPCL cross-country pipeline is not 'Propane' rated. 40. It was also submitted that in case of receipt of ''Butane'' or 'pre-mixed LPG' either directly from the ship or via the 'SALPG's Blender', there is no chance of failure of pipeline due to low temperature embrittlement, as the HPCL pipeline is designed to handle these products. On the other hand, it is submitted that in case of receipt of ''Propane'' and ''Butane'' after blending on board of the ship or through the 'SALPG' blender, without passing through the 'SALPG Cavern' there is every chance of LPG with temperature less than +10 0C entering the HPCL pipeline, which is below the operating temperature of the pipeline, and is hence unsuitable. 41. It was further submitted that in case the blended LPG is taken throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as informing that they are out of business and the OMCs pointed out that business of the Port was also being affected, recently permissions have been given to EIPL to set up a second set of unloading arms. However, it is more efficient for both terminals (SALPG and EIPL) to operate through a single set of unloading as unnecessary ship movement will be avoided." 44. There is only one dispatch pipeline that moves LPG product from the unloading area to connect to other storage facilities. This dispatch line is owned and operated by HPCL. While being permitted by VPT to lay the said pipeline on its leased land, HPCL expressly agreed that all the parties who are allowed by VPT to set up bulk storage facilities at Vizag Port will be permitted to be connected to the said pipeline. 45. 'EIPL' storage facility and pipeline is connected through this HPCL dispatch line to the LPG jelly area, and is dependent on this line and the jelly- connected SALPG LPG receipt pipeline system to receive LPG product. 46. 'SALPG' insists that for using its unloading and upstream terminalling infrastructure for blended product, its storage (cavern) should mandatorily be used on account of alleged saf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sub-lessee. As per Clause 24 the HPCL and its sub- lessee SALPG is required to share its pipeline system with other users on reasonable terms as recommended by 'VPT' (Lessor). 53. In furtherance of the above, when VPT gave the permission/lease to HPCL to setup the subject facility at the outer harbour, it came with a categorical obligation vide its letter dated 08.07.1997 stating that: "The Lessee shall share the pipeline facility with other users whenever it is recommended by VPT at reasonable terms and conditions as may be decided by VPT and that the Lessee shall make necessary arrangements by planning tap-off facility to the parallel marketers in the EXIM Park area." 54. HPCL letter dated 11.08.1998 to VPT- HPCL specifically agreed with VPT in the following words "We confirm our in-principle acceptance to share our LPG Import facilities with other PSUs and private parties who are permitted by VPT to put up LPG handling facilities at Visakhapatnam. This is in line with our earlier advice wherein we had already confirmed that our infrastructure at the outer harbour has been planned to cater to the requirement of LPG for the entire industry including, private parties who h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, further directed 'EIPL' to give intimation 'once the facilities are fully ready along with detailed Site/Layout and P & I Diagram of entire area to arrange its inspection to consider granting permission for commissioning. 59. The Commission noticed that the 'PESO' had not found fault with the design of the EIPL's LPG blender and allowed it to install the same with certain conditions. 60. Before the Commission, 'SALPG' submitted that as per 'PESO' letter dated 5th August, 2010, there is a requirement that a clear consent letter should be obtained from the owners of the twin pipelines authorising tap off for the use of EIPL's proposed blending unit. It was argued that SALPG had not given any consent in this regard. 61. However, such objection was not accepted by the Commission. 62. 'SALPG' which was allowing 'EIPL' to get cash through by bypass, for no reason can deny its consent. The representative of the 'SALPG' had stated to the VPT that there are no technical constraints for provision of tap off. The relevant extracts of the minutes dated 8th November, 2010 of the meeting held at VPT, reads as under : "M/s. SALPG Representative informed that tampering (Tap off) of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt temperature that is 'Propane' at (-) 45 degree C and 'Butane' at (-) 5 degree C, in absence of proper mechanism of bring it down it may affect the pipeline and therefore, now after blending it required to be sent through 'cavern'. For proper appreciation, parties have filed the 'Process Flow Diagram of Existing LPG Facilities at Vizag Port', as under:- 67. From the 'Process Flow Diagram of Existing LPG Facilities', it is clear that when pre-mixed, gas of 'Propane' and 'Butane' used to come through heater fitted in the LPG vessel. 68. 'EIPL' explained the Seawater Heat Exchanger system is designed to heat a mixture of 'Propane' at (-45) degree centigrade and 'Butane' at (-5) degree centigrade from the mixed temperature of approximately (-20) degree centigrade to (+2) degree centigrade. Thus, heat regulation system has the ability to elevate the temperature of the products by (+22) degree centigrade. In case of import of 'Butane' and 'Propane' separately, 'Propane' alone is heated using ship heater to convert it to a positive temperature, upto (+50) degree centigrade, from (-45) degree centigrade. However, 'Butane' is not heated in ship. Both the products when transmitted out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant requirement and may cause accidental release of refrigerated cargo into HPCL's pumps. 70. The Commission consists of 'expert body' and has taken into consideration other expert's report including the stand taken by the representative of the SALPG in its meeting held on 8th November, 2010 who informed that the tempering of (tap off) of the existing system is not possible, since it is integrated system and there are no technical constraints. 71. The Commission rightly observed that the 'SALPG' being the only player offering upstream terminalling also it has control over the terminalling infrastructure also. 72. Earlier when 'EIPL' used to supply the pre-mixed gas through bypass, it allowed to get it through bypass but at this stage SALPG had not granted any permission and before the Commission it raised the technical objection, which we noticed that which was not based on any justified 'expert report'. 73. The design parameter of cross-country pipeline of LPG is (+1) degree centigrade. The 'VPT' in its response dated 12th January, 2017 before the Commission had stated that there was no ship heater failure reported to it so far. It is for the said reason the report submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is free to decide whether to avail the services of EIPL and SALPG. Therefore, it is rightly contended on behalf of the Informant (EIPL) that SALPG cannot dictate to have the mix product through its 'cavern'. 78. The Commission rightly held that protection of commercial interest by a dominant enterprise, at the cost of competition, is contrary to its responsibility cast under the Act. SALPG has pointed out that allowing bypass would reduce the discharge rate i.e. from 1000 MT/hour to 250-300 MT/hour, thereby increasing the demurrage charges to OMCs. Seen from the perspective of competition, the Commission is of the view that if option of bypass is allowed, the users, i.e. OMCs could in that case decide on the choice to make for after weighing the cost and other relevant factors. In other words, it is for the customers to decide whether they would like to pay for use of the cavern or opt for higher vessel retention. 79. It rightly observed that effective competition does not necessarily mean prevalence of the most efficient to the exclusion of relatively less efficient choices to consumers. Therefore, in the absence of capacity constraints to accommodate the services offered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78.79 Oct 9.66 6.03 12.89 10.26 9.34 13.88 11.53 73.60 Nov 7.46 10.75 13.59 8.30 11.62 10.04 14.22 75.98 Dec 15.35 10.77 8.48 5.52 12.70 10.58 8.05 71.45 Total 135.43 125.51 131.73 113.23 118.46 129.20 102.94 856.50 Source: Response dated 12th January, 2017 These details show that, waiting of vessels, if any, is not on account of capacity constraints. Not even half of the actual capacity seemed to have been utilised and a more efficient scheduling on the part of OMCs and traffic management by VPT would go a long way to reduce such waiting. 81. Learned counsel for the VPT submitted that large number of related buyers have been affected and submitted as follows: (i) Loss suffered by OMCs and other related players a. Pursuant to the directions issued by the Commission, oil importers which had earlier discontinued LPG import on account of SALPG's denial of access of the terminalling facilities to EIPL and the high handling charges levied by SAPLG, have approached the VPT requesting to facilitate recommencement of LPG import operations. One such importer- SHV Energy Pvt. Ltd.- has vide its letter dated 06.10.2018 requested the VPT to revive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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