Shri Raghunath Patil Vs. Rashtriya Chemicals and Fertilizers Limited

[Image omitted. See the official document.]

[Image omitted. See the official document.]

COMPETITION COMMISSION OF INDIA

Case No. 03 of 2025

In Re:

Shri Raghunath Patil,
President of Shetkari Sanghatana
Sakharale Village, Valva-Islampur
Taluka, Sangli District,
Maharashtra, 415414.
Informant

And

Rashtriya Chemicals and Fertilizers Limited
Priyadarshini Building,
Eastern Express Highway, Sion,
Mumbai, Maharashtra, 400022.
Opposite Party

CORAM

Ms. Ravneet Kaur
Chairperson

Mr. Anil Agrawal
Member

Ms. Sweta Kakkad
Member

Mr. Deepak Anurag
Member

Order under Section 26(1) of the Competition Act, 2002

1. The present Information has been filed by Shri Raghunath Patil (“Informant”) under Section 19(1)(a) of the Competition Act, 2002 (“Act”) before the Competition Commission of India (“Commission”), alleging contravention of the provisions of Sections 3 and 4 of the Act by Rashtriya Chemicals and Fertilizers Limited (“RCFL” /“Opposite Party”/“OP”).

2. The Informant is stated to be a farmer leader and the President of Shetkari Sanghatana (also known as farmers’ organization), in the State of Maharashtra. The OP is a leading fertilizers and chemicals manufacturing “Navratna” company with about 75% of its equity held by the Government of India (“GoI”). It has two operating units in Maharashtra, one at Trombay in Mumbai and another at Thal, Raigad district. The OP manufactures Urea, complex fertilizers, Rio-fertilizers, Micro-nutrients, 100% water soluble fertilizers, soil conditioners and a wide range of other products.

3. As per the Informant, over the last few years, farmers in Maharashtra have been facing the issue of other fertilizers getting tied/tagged/linked with the sale of Urea. Urea manufacturing companies are stated to be forcing the dealers, and consequently farmers, to buy other products by tagging them with Urea. It has been stated that since the maximum selling price of Urea is fixed, manufacturers cannot increase its price but rather take advantage of the situation by compelling dealers and farmers to purchase additional (non-subsidized) products along with Urea, which is not only an abuse of the subsidy scheme implemented by the Government but also results in anti-competitive outcomes.

4. The Informant has stated that evidence of alleged anti-competitive practice of tagging products with Urea can be found in press reports, communications/representations of the government and fertilizer dealers’ associations, as detailed below:

• i. During the Kharif season of 2022, Maharashtra Fertilizer Supply Company (“RASA”) started to charge vendors for supply of fertilizers not even demanded for, which in turn compelled farmers to buy a product which they did not have use or means for, leading to conflicts between farmers and vendors. Considering the strong protests from farmers, the Maharashtra Fertilizers, Pesticides, Seeds Dealers Association (“MAFDA”), vide a letter dated 05.07.2022, requested RASA to stop forcing vendors from selling such additional fertilizers, and prevent the tagging of unwanted fertilizers.
• ii. In November 2022, the Ministry of Chemicals and Fertilizers, Department of Fertilizers, GoI, vide its notice dated 17.11.2022, flagged the issue of tagging other products at the time of selling and warned all the fertilizer companies that this practice was illegal and would be subject to strict action.
• iii. Vide a letter dated 17.01.2023, the Agricultural Commissionerate of the State of Maharashtra addressed a communication to the representatives of fertilizer companies to summon them for a meeting to discuss the indefinite strike by agricultural vendors in the Satara district of Maharashtra, which was taking place due to the excessive linking of other products with Urea by fertilizer companies.
• iv. On 25.06.2024, an online meeting of all Fertilizer Producers/Suppliers, Nodal Agency, MAFDA was conducted regarding inter alia, the issue of sale of fertilizers through ‘linking’. It was highlighted that complaints were being received from local officials about the mandatory purchase of insecticides or other products along with fertilizers. In respect thereof, all producers, suppliers, and sellers were instructed not to sell fertilizers through linking, which if not followed, would be subject to strict legal action.
• v. On 04.07.2024, another complaint was filed by the President of the Farmer Association Thergao, Nashik, Maharashtra regarding the linking with chemical fertilizers. Pursuant to the same, the Department of Agriculture, Nashik, Maharashtra, Government of Maharashtra, issued a notice to the fertilizer manufacturing companies and the President of the Nashik District Agro Dealers Association, warning them about the issue of linking of other fertilizers with the input product (Urea), and reiterating that such conduct was prohibited and ought to be stopped immediately.
• vi. On 23.07.2024, the Agricultural Director, Commissionerate of Agriculture, Maharashtra State, Pune, after realizing that the Urea producing companies in the state were not adhering to the circulars and warnings being issued so far, issued a notice stating that all the fertilizer producers and sellers “are advised to take precaution that no linking of chemical fertilizers is done….that if any linking of chemical fertilizers is found, action will be taken against you under the Fertilizers (Control) Order, 1985 and the Essential Commodities Act, 1955.”
• vii. On account of fertilizer companies not mending their ways, despite a multitude of requests and warnings, the farmers and several dealers’ associations from states all across the country, including Maharashtra wrote to the Ministry of Chemicals and Fertilizers in July 2024 intimating it about how “almost all fertilizer companies by force give various types of other products along with Urea and DAP by tagging them, which remain in the warehouse of traders and traders who suffer losses. It is necessary to stop this practice of forced tagging immediately.”
• viii. Following the representations received from various States between 25.07.2024 and 29.07.2024, the Ministry of Agriculture sent out a letter on 02.08.2024, to all Urea and P&K manufacturers/importers, directing them to furnish comments/explanations on the issue of forcing other products/fertilizers by tagging them with Urea.
• ix. The Informant has referred to similar instances in other States such as Uttar Pradesh, Punjab and Karnataka.

5. The Informant also provided an audio-video recording dated 19.07.2024 of a dealer by the name of Adhiraj Agro Agency located in Vadgaon Nimbalkar Village, Baramati Tehsil, Pune District, Maharashtra, explaining how the practice is being carried out by the OP. Another audio-video recording (along with pictures and receipts) of the sale of additional products along with Urea, that occurred on 14.07.2024 with retailer Navnat Seva Krushi Kendra situated in Abhone, Kalwan, Nashik, Maharashtra, is provided which shows that the purchaser is forced to buy the OP’s water-soluble Nitrogen Phosphate Potash (“NPK”) product along with Urea. The Informant has also provided an affidavit dated 02.07.2024 by a farmer situated in Nivri, Shirur Taluka, Pune District, Maharashtra along with an invoice dated 25.06.2024 confirming this practice by the OP.

6. The conduct of the OP, vis-à-vis the dealers/vendors, of selling Urea along with tied-in products (other chemical fertilizers) is stated to categorically fall within the ambit of the Act and is alleged to be in violation of Sections 3(4) and 4 of the Act. It is also submitted that the OP squarely fits within the meaning of “enterprise” as prescribed by Section 2(h) of the Act, since the sale and supply of Urea and other fertilizers by the OP is an economic activity and not relatable to any sovereign functions.

7. With regard to the relevant product market, the Informant has stated that Urea has a distinct chemical composition and is not substitutable with any other fertilizer as it is the only 100% water soluble fertilizer to contain 46% nitrogen and is readily absorbed by the soil. It is also stated that the end use of Urea cannot be substituted or interchanged with any other fertilizer since each fertilizer provides a unique nutrition to the soil and prepares it accordingly.

8. The Informant also stated that due to its importance, the sale price of Urea is regulated by the Central Government, which subsidizes the manufacture of Urea for agricultural use. The Maximum Retail Price (“MRP”) of Urea is statutorily fixed by the GoI. The difference between the delivered cost of fertilizers at farm gate and MRP payable by the farmer is given as subsidy to the fertilizer manufacturer/importer by the GoI. The GoI also regulates various aspects of the production and distribution of Urea.

9. It is stated that the Fertilizer Movement Division of the Department of Fertilizers is entrusted with ensuring adequate and timely availability of fertilizers to the farmers in all parts of the country. Requirement of certain essential fertilizers [Urea, DAP, Muriate of Potash (“MOP”) and NPK] for each season is finalized by the Department of Agriculture and Cooperation & Farmer’s Welfare (in consultation with respective State Governments). The Division then prepares a supply plan in consultation with manufacturers of Urea, DAP, NPK, and MOP to fulfil the monthly requirement in the states. The monthly supply plan is prepared keeping in view the following factors: (i) approximately 50% supply should be from indigenous sources; (ii) established marketing zones of the companies; and (iii) keeping the lead distance as minimum as possible.

10. The agreed monthly supply plan for a month is issued just prior to the end of the preceding month. The supply plan, which consists of details of how much Urea, DAP, MOP, and NPK is to be supplied by each manufacturer in each state, is sent to all State Departments of Agriculture and all manufacturing companies. The movement of fertilizers is monitored through an online web-based monitoring system i.e., integrated Fertilizers Monitoring System (“iFMS”) & e-Urvarak DashBoard.

11. The Informant stated that the Central and State Governments control the supply of Urea by restricting the area within which a company may sell its Urea and ensuring that the supply is not far from the manufacturing facilities. Further, the Central and State Government also specify the quantities to be supplied by each company in each State.

12. The Informant further stated that the Commission, in its order dated 30.07.2024, has adopted a state-wide approach while assessing a proposed merger between Paradeep Phosphates Limited and Mangalore Chemicals and Fertilizers Limited. Based on the information provided, the Informant submitted that the relevant geographic market can only be delineated on a state-wise basis and not a pan-India basis. The Informant has further submitted that it has clinching evidence of abuse of dominance by the OP which is causing an adverse effect in the market of State of Maharashtra. Thus, in the present matter, the Informant proposed the relevant market as “sale of Urea in the State of Maharashtra.”

13. With regard to OP’s dominance, the Informant provided the market shares of the Urea manufacturing companies in the State of Maharashtra, based on the data in the supply orders issued by the Department of Fertilizers, as depicted below: