Kerala High Court reserves verdict on providing bulk diesel to Road Transport Corporation

Kerala High Court reserves verdict on providing bulk diesel to Road Transport Corporation

The bench desired to be apprised of the pricing mechanism adopted by the Oil Marketing Companies in setting different rates for bulk and retail consumers

The Kerala High Court has reserved its verdict in the appeal moved by three state-owned Oil Marketing Companies (OMC) against the interim order of a single judge. They had been directed by the judge to provide bulk diesel to the Kerala State Road Transport Corporation (KSRTC) at the retail price.

A division bench of Justice CS Dias and Justice Basant Balaji felt that it could be beneficial if some material was placed before it regarding the pricing mechanism.

Justice Dias said, "We want to know how this price is set. How does this price fluctuate? How does consumer price go up and the retail price comes down? Dollar rate, crude oil may go up, we understand, but how does this difference between consumer and retail pumps come up?"

The interim order came on an appeal after KSRTC petitioned through Advocate Deepu Thankan. It challenged the decision of the OMCs to increase the price of High-Speed Diesel (HSD) sold in bulk to KSRTC. The diesel was sold at a higher rate than the market price charged by retail consumers.

The OMCs had submitted that the single-judge had not dealt with the points raised by them. They maintained that the jurisdiction of the court was limited when there was a contractual agreement as opposed to a statutory requirement.

The oil companies further suggested that the contract between the OMCs and KSRTC contained an arbitration clause making it an effective alternative remedy. Moreover, the oil market was a deregulated one and price fixation was not the forte of the court.

The appeal also pointed out that even in 2013, KSRTC had approached the Supreme Court for similar relief, but the petition was dismissed. The court had held that it was a matter of policy and that the high court could not pass an interim order.

Appearing for the OMCs, Senior Advocate Parag Tripathi argued that the equality rights under the Constitution of India provided that 'unequal' must be treated unequally. Also, the differential pricing could not be termed arbitrary owing to a clear differentiation between a bulk consumer such as KSRTC and a regular retail consumer.

The counsel contended that in its petition, KSRTC had admitted that it did not procure diesel from consumer pumps after the price hike. Therefore, no actual loss was suffered.

Pressing for a stay on the interim order of the single-judge, Advocate Tripathi said that the price of crude oil had risen globally due to factors outside the control of the OMCs. This included the Russian invasion of Ukraine. He maintained that KSRTC owed significant dues to the OMCs for bulk diesel already supplied, indicating that the balance of convenience was in favor of the latter.

Appearing for the KSRTC, Senior Advocate Dushyant Dave submitted that the Supreme Court had held that the appeal could not be entertained unless it was shown that the exercise of discretion was arbitrary.

He argued that being public sector undertakings (PSUs), the price charged by the OMCs for bulk HSD was discriminating against the KSRTC, which was also a PSU.

He said, "The OMCs conduct is completely unbecoming of a public sector undertaking. Having entered into solemn contracts with us, they are clearly abusing their monopolistic position, completely contrary to the contract that they have entered into."

Dave clarified that the KSRTC was not seeking a concessional or subsidized rate. It desired the same market price that was charged from the retail consumers. He informed that KSRTC was suffering over Rs.80 lakhs loss per day and staying the operation of the interim order would affect it adversely.