Beach Mineral Producers Association and IREL (India) Ltd.

Public Version Case No. 26 of 2022 Page 1 of 25 COMPETITION COMMISSION OF INDIA Case No. 26 of 2022 In Re: Beach Mineral Producers Association Ittamozhi Road, Mahadevankulam (Post), Tirunelveli District, Tamil Nadu – 627 657. Informant And IREL (India) Ltd. Plot No. 1207, ECIL Building, Veer Savarkar Marg, Opp. Siddhivinayak Temple, Prabhadevi, Mumbai – 400 028, Maharashtra. Opposite Party CORAM Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member PRESENT For the Informant : None For the Opposite Party : Mr. Tarun Gulati, Senior Advocate, with Mr. Abhay Joshi, Ms. Aayushi Sharma, Ms. Bhaavi Agrawal, Mr. Pavan Kalyan and Ms. Shruti, Advocates, and Mr. G.Balasubramanian, General Manager of IREL (India) Ltd. ORDER Facts 1. Information in the present matter was filed by the Beach Mineral Producers Association (the ‘Informant’) under Section 19(1)(a) of the Competition Act, 2002 (the ‘Act’) against IREL (India) Ltd. (the ‘OP’), alleging contravention of the provisions of Section 4 of the Act. Public Version Case No. 26 of 2022 Page 2 of 25 2. The Informant, a society registered under the Tamil Nadu Societies Registration Act, 1975, comprising members involved in beach minerals industries, filed the present Information alleging that the OP, a Mini Ratna, Category I, Central Public Sector Undertaking (‘PSU’), engaged in mining and production of certain minerals, rare earths and chemicals, is abusing its dominant position in the relevant market of ‘mining and supply of Beach Sand Ilmenite in India’. 3. As per the Informant, post 2018, the OP is the sole producer/ miner of a Beach Sand Mineral (‘BSM’) viz. ‘Beach Sand Ilmenite’ in India. The members of the Informant, who are dependent on the OP for Ilmenite and other BSM, are facing a major crisis in the form of shortage of supply of Ilmenite. The OP often does not respond to Expression of Interest (‘EoI’) issued by domestic consumers of Ilmenite, and rather responds with a Standard Quantity Sales Contract (‘SQSC’) which contains a pre- determined quantity (most of the time lower than demanded). In the absence of any choice, the domestic consumers are forced to accept the extraneous conditions mentioned in the SQSC. Further, the OP supplies adequate quantity of Ilmenite to foreign companies/ multi-nationals, which also contributes to inadequate supply of Ilmenite for domestic consumers. 4. As per the Informant, such practices of the OP amount to imposition of unfair or discriminatory conditions in the sale of Ilmenite, in violation of the provisions of Section 4(2)(a)(i) of the Act. Further, the act/ policy of OP in the form of restricted/ limited supply to domestic consumers also amounts to contravention of the provisions of Section 4(2)(b)(i) of the Act. Apart from the above, the discriminatory and arbitrary policy/ act of the OP in the supply of Ilmenite also amounts to denial of market access in violation of the provisions of Section 4(2)(c) of the Act. Also, as the OP is giving dissimilar treatment to similarly placed consumers i.e., domestic enterprises and foreign companies, which causes distortion of competition in the downstream industries such as paints, tiles, glazed papers, plastics and cosmetic products, such conduct of the OP is in violation of the provisions of Section 4(2)(a)(ii) of the Act. Lastly, as the OP is the sole producer/ miner of Beach Sand Ilmenite, it also makes arbitrary and exorbitant increase in the price of Beach Sand Ilmenite, from time to time. Excessive pricing is an element of ‘unfair price’ in terms of Section 4 of the Act and as such, imposition of such Public Version Case No. 26 of 2022 Page 3 of 25 exploitative, excessive prices is also in violation of the provisions of Section 4(2)(a)(ii) of the Act. 5. Upon consideration of the above Information filed by the Informant, the Commission sought comments of the OP on the same. Thereafter, upon comments of the OP, the Commission also allowed the Informant to file its rejoinder. 6. In its comments, the OP contested the jurisdiction of the Commission by submitting that as it caters to the supply of key strategic minerals, chemicals etc., meant for the atomic energy program in the country, all its operations are incidental to sovereign functions of the Government of India (‘GoI’) and hence, it does not fall within the meaning of ‘enterprise’ defined under Section 2(h) of the Act. Further, it denied its dominant position w.r.t. Beach Sand Ilmenite contesting existence of other players in the market and mentioning its worldwide share as 2-3 percent only, and it also mentioned import of Ilmenite as a competitive constraint. The OP also challenged the mala fides of the Informant as well as tried to justify the prices being charged. The OP also stated that only surplus quantities are exported by it, that too under an Memorandum of Understanding (‘MoU’) of the GoI, and exports are made only after earmarking the estimated requirements of the domestic customers. As such, there is no case made out against the OP. 7. In the rejoinder, the Informant reiterated the averments made in its Information as well as stated that since marketing or sale of Ilmenite by the OP is purely a commercial activity and has no link to ‘atomic energy’, its such function cannot be termed as a sovereign activity to exempt the OP from the jurisdiction of the Commission. Further, the Informant stated that import of Ilmenite cannot be placed in the same market as sale of domestically produced Ilmenite because of price difference. The Informant also reiterated the dominant position of the OP in sale of Ilmenite in India even if the OP is stated to have a few small competitors in this market in India. 8. Upon consideration of the Information filed by the Informant, the comments of the OP thereon, and the rejoinder filed to such comments by the Informant, the Commission formed a prima facie view that – the OP is an ‘enterprise’ within the meaning of the Act performing commercial activities, the relevant market is ‘mining and supply of Public Version Case No. 26 of 2022 Page 4 of 25 Beach Sand Ilmenite in India’, the OP is dominant in this market, and the conduct of the OP as described by the Informant (preferential treatment, excessive pricing, unfair conditions in SQSC) is in violation of certain provisions of Section 4 of the Act. Therefore, vide order dated 18.10.2022 passed under Section 26(1) of the Act, the Commission directed the Director General (‘DG’) to cause an investigation to be made in the matter and submit an investigation report. Investigation by the DG 9. The DG submitted its investigation report on 01.05.2023 finding as follows: 9.1 The relevant market determined by the Commission in its prima facie order is correct i.e. ‘mining and supply of Beach Sand Ilmenite in India’, as Synthetic Rutile, Rutile, Titanium Slag, Leucoxene and Rock Source Ilmenite are not substitutes of Beach Sand Ilmenite in India; 9.2 As the OP is engaged in mining/ production, storage, supply and distribution of Beach Sand Ilmenite in India, which is an economic activity, it is an ‘enterprise’ within the meaning of Section 2(h) of the Act; 9.3 In terms of the factors stated under Section 19(4) of the Act, (i) the OP had the largest market share in the relevant market from 2017-18 to 2021-22, which was above 90% in year 2021-22, (ii) its assets as well as aggregate turnover has increased substantially over the years, (iii) its nearest competitor, another PSU Kerala Metals and Minerals Ltd (‘KMML’), is very small in comparison to the OP and the OP supplies non-strategic minerals such as Beach Sand Ilmenite though its Manavalakurichi in Tamil Nadu, Orissa Sands Complex (‘OSCOM’) in Odisha and Chavara in Kerala units, (iv) inspite of continuous and significant increase in prices over the years, sales of Beach Sand Ilmenite by the OP, both in terms of volume as well as value, has increased over the years, (v) the GoI, vide Notification dated 27.07.2019, has granted exclusivity to the OP to control supply of Beach Sand Ilmenite in India, (vi) as per the rules of GoI, no private enterprise is allowed to have operating rights in respect of atomic minerals in any offshore areas in the country, and (vii) there is very less countervailing buying power exerted by consumers upon the OP as they are mainly dependent on the OP for getting Beach