The competition regulator has imposed R317 crore in penalties on three companies including agro-chemicals major United Phosphorus (UPL), for collusive bidding to supply aluminium phosphide (ALP) tablets to state-run Food Corporation of India (FCI).
After a suo motu probe into the matter by its investigation wing, the Competition Commission of India (CCI) concluded that UPL, Excel Crop Care and Sandhya Organics were guilty of the ?crudest form of bid rigging? as they repeatedly quoted identical prices for the FCI tenders for ALP tablets during 2002-2009. The anti-competitive agreement among the firms inflated FCI?s cost of procurement of the tablet used to preserve grains, the CCI noted.
UPL said it would approach the competition appellate tribunal against the CCI order. ?Imposition of such a huge penalty is unfair and we are being penalised for non-transparent functioning of FCI,? Rajju Shroff, managing director, told FE. FCI officials declined to comment.
The regulator noted that the three companies had even collectively boycotted the FCI?s attempt to wriggle out of this cartel by inviting e-tenders in 2011, a fact that established that they looked for certain ?plus factors? over and above ?price parallelism?.
The CCI probe also found these companies indulged in collusive bidding in supply of tablets to other government agencies like central and state warehousing corporations.
The CCI has imposed penalty of 9% the three-years? (2008-2011) average turnover of each firm under the Competition Act.
This works out to R252 crore for UPL, R63 crore for Excel Crop Care and R1.57 crore for Sandhya Organics.
On the BSE, the UPL scrip fell 6% to R119.90 while the Excel Crop Care scrip fell 5.13% to R116.6.
?The parties acting together and quoting identical prices has deprived FCI of competitive bid rates in matter of procurement of ALP tablets,? the CCI noted.
It further said: ?It seems quite improbable that identical bids can be submitted by the competing parties in a tender as an outcome of their own independent decision and that too when such outcomes are observed in repetition.?
Last year, FCI wrote to CCI that it suffered a rise in cost of grain procurement, citing ?anti-competitive agreement among the manufacturers of ALP in the tenders.? FCI had stated that the manufacturers had formed a cartel and ?one of the manufacturers may be using its dominant position (referring to UPL) to compel other manufacturers to quote the same rates in tenders which is quoted by the dominant manufacturer. ?As a result of the anti-competitive conduct of the ALP manufacturers, the price of tablets has nearly doubled during the period 2007 to 2009 and in all probabilities, the price is likely to rise further in the future,? FCI had said.
The total estimated annual sales of ALP is around Rs 175 crore. FCI and public sector Warehousing Corporation purchase about Rs 40 crore worth of these tablets annually.