Oil Prices Rising Internationally Due To Ukraine Situation; Gradual Passing Of Prices To Consumers Not Arbitrary : Companies To Kerala High Court

The state-owned oil marketing companies told the Kerala High Court on Friday that oil prices are increasing due to the Ukraine war and that the companies are gradually passing on the prices to the consumers, which cannot be termed arbitrary.

The submission was made in response to a p[lea by the Kerala State Road Transport Corporation (KSRTC) challenging the decision of State-owned Oil Marketing Companies to increase the price of diesel sold to the Corporation, which is allegedly much higher than the market price.

"Oil prices are rising internationally since the Ukraine situation started worsening. If the oil companies are gradually passing on the increase to customers, it cannot be said to be an arbitrary price hike", Senior Advocate Parag Tripathi, appearing for the oil companies, submitted.

Senior Advocate Dushyant Dave appeared for KSRTC and argued that till 2018, public sector companies were given subsidies. Later on, the National Policy was formulated as per which bulk consumers were to be given oil at the market rate. This rationale was upheld by the Supreme Court as well.

The Senior Counsel submitted that this decision of the Oil companies violated the said Policy apart from violating public interest.

"The situation now has undergone a complete reversal. Instead of getting subsidies, now we are paying more than private bus owners in the State. This is discriminatory, violative of Article 14 and causes grave prejudice to the public."

The petitioner also made it clear that they were not challenging the price fixation, but the arbitrary manner in which it was being fixed for bulk purchasers citing that the oil companies are bound by the contract which stipulated that the price can not go over the retail market price. It was also pointed out that the companies were in a monopolistic position and should refrain from behaving in such manner.

"Why should state-owned companies act against the public interest? Why should Kerala's consumers suffer?"

Regarding the reliance placed by the respondents on their arbitration clause, the Senior Counsel referred to the Supreme Court decision in Unitech Ltd v. Telangana State Industrial Infrastructure Corporation where it was held that the presence of an arbitration clause within a contract between a state instrumentality and a private party is not an absolute bar to availing remedies under Article 226 of the Constitution. Therefore, it was submitted that the Court was a safeguard against the arbitrary exercise of power.

KSRTC further argued that it is under serious debt while emphasising that it discharges public duty. This is a classic case where Article 14 is being violated, it was argued.

It was also pointed out that there was no denial in the counter submitted by the respondents that they were charging KSRTC more than private bus services.

"The damage to the public interest is 85-90 lakhs a day! Therefore, I beseech your lordship to grant interim relief. I respectfully submit that your lordship may admit the petition, grant interim relief and protect us," the petitioner's counsel submitted.

Although the petitioner urged for an interim relief, Justice N. Nagaresh declined to grant one citing that an interim relief cannot be granted at this stage since the Court was yet to conclude hearing the matter.

Senior Advocate Parag Tripathi appeared for the oil companies and argued that this was not a case that calls for granting interim relief. He contended that since the petitioners themselves admit that they are not procuring oil at a higher rate, there is no prejudice caused to them.

"The Centre does not fix the price. My friend has been wrongly instructed. They have not suffered any loss. The Supreme Court decision the petitioner relied on was rendered when the oil price was being regulated by the government. But the market was later deregulated and now it remains unregulated," he asserted. 

It was also pointed out that ever since the price of HSD went over the retail rate, KSRTC buses have been getting diesel from retail pumps instead of consumer pumps. Therefore, no prejudice is not caused to KSRTC. 

Regarding the issue of petitioner's debts, the oil companies indicated that KSRTC owes 123 Crores to Indian Oil even before the diesel process went up.

"Such a petitioner who is defaulting in dues may not be permitted to challenge pricing. Article 14 does not apply. Oil prices are rising internationally since the Ukraine situation started worsening. If the oil companies are gradually passing on the increase to customers, it cannot be said to be an arbitrary price hike."

The Court had to wind up the hearing by 3 pm since there was a reference organised at the Chief Justice's Court for the farewell of two Judges who were due to retire in May. 

The matter will be taken up next on Wednesday at 1:45 pm. 

The Court had earlier refused to grant interim relief on the plea moved by Kerala State Road Transport Corporation (KSRTC) challenging the decision of State-owned Oil Marketing Companies to increase the price of diesel sold to the Corporation, which is allegedly much higher than the market price. The Oil Marketing Companies were directed to file a statement explaining the present pricing mechanism by the next posting date.