India- Central Govt. further dilutes competitive neutrality- exempts Oil and Gas PSUs from merger control by CCI
In continuation of its slew of exemptions , the Government of India, Ministry of Corporate Affairs (MCA) , vide its recent Gazette notification dated 22.11.2017 has exempted all Central Public Sector Enterprises (CPSEs) in the Oil & Gas sectors (created under under the Petroleum Act, 1934) from the pre- merger scrutiny by the Competition Commission of India (CCI) under sections 5 & 6 of the Competition Act,2002. The benefit of this exemption has also been extended to all wholly or partly owned subsidiaries of such enterprises .This exemption will be valid for a period of five years from the date of publication of the notification i.e. till 22nd November, 2022.
This notification has been issued in sync with the current government’s policy of consolidation and stake purchases among state-owned oil and gas companies, particularly , in the context of the contemplated merger of two public sector energy majors, Hindustan Petroleum Corporation (HPCL) and Oil and Natural Gas Corporation Limited (ONGC).
MCA has previously exempted (i) Banking Company in respect of which Central Government has issued notification under Section 45 of the Banking Regulation Act, 1945 (Sick Banking Company); (ii) Regional Rural Banks in respect of which the Central Government has issued a notification under sub-section (1) of section 23A of the Regional Rural Banks Act, 1976; and (iii) all cases of reconstitution, transfer of the whole or any part thereof and amalgamation of nationalized banks, under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. This news was analysed by me in my earlier blog which may be read here .
The present exemption is in pursuance to the government’s policy of consolidation and creating a mega energy major to be able to compete with the larger global energy majors such as Endesa SA (Spain), Rosneft Oil (Russia), Reliance Industries (India) RWE AG (Germany), Luke Oil (Russia) , China Petroleum (China), Chevron Corp.(USA), Total SA (France) etc.
Although the recent spate of exemptions is being hailed by everyone under the perceived nationalistic fervor of creating “National Champions” in India pursued by the present regime , yet, in my humble opinion this dilutes the golden principle of “competitive neutrality” which is the bedrock of a sound national competition policy.
I have already expressed my opinion on this aspect in my earlier article Economics of Exemptions from Competition Law , in which I have discussed international best practices based on European and other jurisdictions .