CCI set to give SAIL clean chit over exclusive agreement with Railways

Written by parul | Parul Chhaparia | Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Dec 28 2011, 05:57am hrs
Two years after the Competition Commission of India (CCI) initiated an investigation into the exclusive agreement between the Indian Railways and Steel Authority of India (SAIL) for alleged breach of the competition law, the anti-trust regulator is set to to close the matter giving SAIL a clean chit.

Top CCI sources said that the decision was taken last month with SAIL getting a near unanimous verdict in its favour with three members absolving the countrys largest steelmaker of any wrongdoing while only one dissented.

However, it is also learnt that one of the four members present has also proposed that the exclusive arrangement should end by early next year and the Indian Railways should start inviting tenders for rail steel from April 1, 2012. The rationale being that by March 31, 2012, SAIL would have recovered the entire R711 crore it had invested (at the behest of the railways) for setting up a separate manufacturing facility at Bhilai to produce rail steel.

At present up to 9% or R1,900 crore of SAILs overall sales comes from the Indian Railways. The company produces around 7.5 lakh tonne rail steel every year at its Bhilai plant. According to company officials, SAIL is now planning to install a Universal Rail Mill under its overall modernisation and expansion plan at Bhilai to supply not only to the Indian Railways but export it as well. The mill is slated to have a capacity of 1.2 million tonne (mt) per annum and will be set up at a cost of R1,175 crore.

One of the members is learnt to have observed that SAIL would recover the entire cost that it incurred for setting up the new manufacturing unit by March 31, 2012, henceforth Indian Railways should invite tenders which would throw open the gates for other steel makers like JSPL to put in their bids as well. CCI has given a clean chit to SAIL. The matter has been closely looked into after which the decision has been arrived upon, a senior CCI official told FE.

When contacted about the development spokespersons of both the Indian Railways and SAIL refused to comment saying that they are yet to receive any order from CCI.

The complaint dates back to December 2009, when Jindal Steel and Power (JSPL) had alleged that the exclusive arrangement debarred JSPL (which also manufactures rail steel) from supplying rail steel to Indian Railways. Dismissing the complaint SAIL had argued that the company had to undertake an investment of over Rs 700 crore solely for the manufacture of rail steel which it was not producing till then. They had further argued it was because of this that the two sides had decided to enter into an arrangement in 2003 as per which SAIL would be the sole supplier of rail steel to Indian Railways.

The case is not only among the oldest but has also been one of the most important matters that the commission has presided over since its inception. Soon after CCI ordered an investigation into the case, SAIL successfully sought an intervention from Competition Appellate Tribunal which imposed a stay order on CCIs probe. Infuriated by Compats move the commission moved the Supreme Court to get the order lifted. This was followed by hectic discussions among corporate lawyers on what form competition law in the country should take and how it should evolve.

In September 2010, the SC finally ruled in favour of CCI that the competition regulator can order investigations based purely on the complaint without having to hear either parties.