Kerala HC Passes Interim Order Directing Oil Companies To Provide Diesel To KSRTC At Retail Rates

The Kerala High Court today asked the State-run oil marketing companies (OMCs) to provide diesel to the Kerala State Road Transport Corporation (KSRTC) buses at retail rates and not the higher rate being charged from bulk purchasers.

The interim order by Justice N Nagaresh was passed in a plea by KSRTC challenging the OMCs decision to charge a higher rate from bulk purchasers of diesel as compared to retail prices of the fuel.

Whatever be the mechanism adopted by the respondents (OMCs) in fixing the rates for bulk supply to consumer pumps, prima facie the rate levied is highly exorbitant. If it is in pursuance of any agreement, the same is prima facie, an extremely unconscionable term of the bargain. In the facts of the case, there will be an interim order directing the respondents (OMCs) to levy the price for High Speed Diesel for the petitioner at par with the price available at retail pumps. The interim order is provisional and will be subject to the outcome of the writ petition, the Court directed.

On March 22, the Court declined to stay the OMCs decision to hike price of bulk diesel purchase or restrict them from further increasing the rates, but had asked them to explain the manner in which their pricing mechanism worked.

Today, the oil companies represented by Senior Advocate Parag Tripathi told the Court that it was a commercial dispute which was governed by a contract which specifically provides that any dispute has to be resolved by negotiation or arbitration. Therefore, the writ petition moved by KSRTC was not maintainable, Tripathi told the court.

He further contended before the Court that the issue of pricing, which is being challenged via the instant plea, was explicitly contemplated in the agreement and falls within the ambit of dispute as described in the contract.

The oil companies further contended that it is settled law that fixation of price is a policy consideration and that price fixation is not the forte of the court and the scope of judicial review is extremely limited. They contended that KSRTC wanted the court to intervene in a purely contractual field resulting in price fixation.

"The price of petroleum products depends on several factors and considerations, including its inevitable dependence on international pricing. There is always a possibility of difference in case of consumer pumps like the petitioner and retail outlets from where citizens get their petroleum products," the OMCs told the Court.

KSRTC, represented by Senior Advocate Dushyant Dave, opposed the OMCs contention and said the oil companies ought to have provided fuel to the corporation at competitive prices, instead of arbitrarily increasing the rates of bulk purchasers.

The OMCs had argued during the previous hearing that KSRTC owes 123 Crores to IOC even prior to the differential pricing.

The Court, on the previous date of hearing, had said that the OMCs ought to have given a differential treatment to public service utilities like KSRTC. Alleging hostile discrimination against it by the OMCs, KSRTC urged the High Court to either stay the price hike or to restrict any further increase in the rate for bulk purchasers.

It contended in its plea that it was already running under heavy losses and without any interim relief, it would be forced to shut down. KSRTC contended that it has to pay more than Rs 27 extra per litre for diesel to the State-run OMCs as compared to the rate of the fuel at private retail outlets.

Even the diesel supplied to private bus operators by OMCs was at a lesser rate than that charged from KSRTC, the petition claimed. The transport corporation claimed, in its plea, that it was charged Rs 121.35 per litre for diesel by the OMCs, while the other consumers of the companies were getting it for Rs 91.72 per litre.

"There is no reason forthcoming for supplying the diesel to the KSRTC alone at a higher price. It cannot be said that it is because of the bulk use by the KSRTC, as there is no shortage of petroleum products in the country. There is no valid explanation for treating KSRTC as a separate class," the petition said.

Presently, KSRTC operates 5,481 buses on 3,525 routes every day with around 18.4 lakh passengers per day, it said and added that it presently requires around 300-400 kilolitres of diesel per day.

This is lesser than the pre-COVID-19 situation, when the transport corporation was operating 6,241 buses on 6,389 routes every day with an average ridership of 35 lakh per day, the petition said

It contended that permitting OMCs to charge bulk buyers more than retail purchasers would push the already ailing corporation into the deep abyss of debt and deprive the general public of its service. The OMCs decision to increase price of bulk purchase of diesel would result in an approximate accumulated loss of around Rs 83 lakh per day for the KSRTC, the petition claimed.

"The increase in the price of diesel to the KSRTC alone will force them to take a decision to cancel the schedules to manage the cost of services. The increase in price of diesel will directly affect the KSRTC passengers as the KSRTC will have to proportionally increase the tariff rates," the petition further contended.

KSRTC urged the court to direct the OMCs to sell diesel to it at the market rates prevailing at retail outlets and to declare the charging of a higher price from the corporation as discriminatory, arbitrary, unreasonable and violative of Article 14 of the Constitution.

With PTI inputs