M/s AGI Greenpac Limited and M/s Bhagyanagar Gas Limited

Case No. 08 of 2024 Page 1 of 13 COMPETITION COMMISSION OF INDIA Case No. 08 of 2024 In Re: M/s AGI Greenpac Limited (Formerly HSIL Ltd.) 2, Red Cross Place, Kolkata-700001 Informant And M/s Bhagyanagar Gas Limited, 2nd Floor, Parishram Bhavan, APIDC Building, Basheer Bagh, Hyderabad, Telangana-500004. Opposite Party CORAM Ms. Ravneet Kaur Chairperson Mr. Anil Agrawal Member Ms. Sweta Kakkad Member Mr. Deepak Anurag Member Order under Section 26(2) of the Competition Act, 2002 1. The present Information has been filed by M/s AGI Greenpac Limited (‘Informant’) under Section 19(1)(a) of the Competition Act, 2002 (‘Act’) alleging contravention of the provisions of Section 4 by M/s Bhagyanagar Gas Limited (‘Opposite Party’/ ‘OP’). Case No. 08 of 2024 Page 2 of 13 2. The Informant has stated that it is a company incorporated under the Companies Act, 1956 having registered office at 2, Red Cross Place, Kolkata-700001 and corporate office at Glass Factory Road, Sanathnagar, Hyderabad, Telangana-500018. It is stated to be a unit of AGI Glaspac, which operates the second largest container glass manufacturing facility in the country with factories located at Hyderabad and Bhongir in Telangana. The Opposite Party is a company registered under the Companies Act, 1956 and is engaged in the business of distribution and marketing of natural gas and implementation of City Gas Distribution (‘CGD’) project in the states of Telangana and Andhra Pradesh. 3. As per the Informant, the Opposite Party has been authorized by Petroleum and Natural Gas Regulatory Board (‘PNGRB’/ ‘Board’) for implementation of CGD project in Hyderabad/Secunderabad, Vijayawada & Kakinada vide authorization dated 23.06.2009 (‘Authorized Entity’). In accordance with Regulation 5(1)(a) of the PNGRB (Exclusivity for City or Local Natural Gas Distribution Networks) Regulations, 2008 (‘Exclusivity Regulations’), the Authorized Entity shall have exclusivity for laying, building and operation of the City or Local Natural Gas Distribution network (‘CGD Network’) for a period of 25 years from the date of authorization. 4. It has been stated by the Informant that in accordance with Regulation 6(1) of Exclusivity Regulations, the CGD network is provided exclusivity from the purview of Common Carrier or Contract Carrier for a period of five years from the date of authorization under the PNGRB (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 (‘Authorizing Regulations’) which may be extended by the PNGRB upto eight years. The effect of exclusivity from Common Carrier or Contract Carrier is that no entity other than the authorized entity can market natural gas in the given geographical area. In accordance with Regulation 3(2)(a) of Authorizing Regulations, the customers like the Informant, having requirement of natural gas upto 50,000 SCMD, shall be supplied natural gas through the Authorized Entity only. Case No. 08 of 2024 Page 3 of 13 5. The Authorizing Regulations and Exclusivity Regulations provide for a monopoly to the Authorized Entity in the given geographical area for sale, distribution and marketing of natural gas to the various consumers and hence the Opposite Party is a dominant player in the geographical area of Hyderabad/Secunderabad, Vijayawada & Kakinada. 6. The Informant has averred that the glass manufacturing involves melting of sand, soda ash and some chemicals collectively called a batch along with the cullet (broken glass). The Informant is stated to use furnace oil, LPG, natural gas etc. as the source of fuel for melting the broken glass. As per the Information, the fuel used is not environment friendly and causes pollution, therefore, in order to bring down the pollution content, the Informant decided to substitute part of its fuel requirements to natural gas for its furnace at Hyderabad. 7. The Informant entered into a Gas Sale Agreement (‘GSA’) dated 19.02.2019 with the Opposite Party, in the given geographical area, for sale and purchase of 30,000 SCMD of natural gas. Clause (g) of the GSA provided for the price of gas as set out in the Price Side Letter which was based on the spot RLNG Price that varied from month-to-month. The price of natural gas was determined in terms formula set out in the Price Side Letter and depending on the relevant indices, the price of natural gas under the GSA was arrived at and communicated by the Opposite Party to the Informant by the last day of the month. The method as stipulated in the Price Side Letter is provided as under: “9. PRICE OF GAS (a) The Price which Buyer shall pay for quantities at Gas to be sold and purchased shall be as set out in the Price Side Letter, which is based on spot RLNG Price, which generally varies from month to month.” 8. The Informant has alleged that the Opposite Party does not purchase RLNG directly from foreign supplier but purchases natural gas from GAIL whose supplies of natural gas are based on pool of gases of different prices viz; domestic gas, RLNG supplies under long term contract, spot RLNG etc. Hence, the resultant price at which GAIL sells to the Opposite Party is much lesser than the price of natural gas available on spot Case No. 08 of 2024 Page 4 of 13 RLNG basis and therefore, the inclusion of spot RLNG Price in the Price Side Letter is deliberately done to make huge profit at the cost of consumers like the Informant. 9. It has been alleged that the Opposite Party has failed to provide a copy of the Price Side Letter as mentioned in clause 9 of the GSA rather the Opposite Party has been providing a price for each month either in the last week of the previous month or the first week of the given month which is not in accordance with GSA. 10. It has also been alleged that initially the Opposite Party was supplying gas at a reasonable price, however, since May, 2022, the Opposite Party has been supplying gas at an unreasonably high price ranging from Rs. 57/SCM to Rs. 66/SCM. Further, the Informant has stated that it has another plant at Bhongir in Telangana where the supply of natural gas is being made by GAIL and at times the supply is arranged from third party like IGX, Shell, HPCL, India Gas, etc. wherein the prices are comparatively much cheaper. 11. It has been stated that a report published by IGX (India's first automated national-level Gas Exchange for physical delivery of natural gas) shows that for the majority of the months in the year, the average price available at the IGX was hovering around US$ 15/- MMBTU while the prices that have been charged by the Opposite Party was approximately US$ l8/MMBTU. It has been further alleged that the Opposite Party does not have any direct contract for purchase of spot LNG and therefore, in order to abuse its dominant position has priced the natural gas at spot RLNG basis and also to make huge profit at the cost of the consumers like the Informant. 12. The Informant as early as in 2020 requested the Opposite Party to enter into a Tri-partite Agreement wherein the Informant would purchase natural gas from a third party and would use the pipelines of the Opposite Party for supply of the same to its plant for a reasonable transportation price to the Opposite Party. However, the Opposite Party vide its letter dated 25.06.2020 informed that such an arrangement was not feasible and that they will take it up with the Ministry of Petroleum and Natural Gas at an appropriate time. The Informant subsequently vide emails dated 24.10.2022, 04.11.2022 and