CCI Orders Detailed Investigation Against Odisha State Civil Supplies Corporation Ltd.

On November 1, 2019, the CCI ordered the DG to further investigate allegations of abuse of dominance, made by M/s. Maa Metakani Rice Industries (‘Informant’) against Odisha State Civil Supplies Corporation Ltd. (‘OSCSCL’). [1]

The Informant is engaged in the business of rice (paddy) milling, production of rice, broken rice, bran, etc. and sale thereof, to act as a custom milling agent of OSCSCL. OSCSCL is the largest agency involved in paddy procurement in the State of Odisha, and purchases more than 90% of the total paddy produced in the State. Central Government extends support through Food Corporation of India and State agencies.

The Informant had entered into an agreement with OSCSCL for custom milling of paddy for the Kharif Marketing Season (‘KMS’) 2015-16 and commenced delivery of rice. OSCSCL bought the Standard Fire Floater Declaration Policy (relating to Standard Fire Insurance coverage of the stock of OSCSCL kept and maintained at the custom miller’s premises, with respect to the Informant) but did not share the terms & conditions or a copy of the said insurance with the Informant even though part of the premium was being collected from it. Later, due to floods, the stored crops were destroyed and the Informant suffered a loss of about INR 87.10 Lakhs (approx. USD 12,000). However, OSCSCL withheld the custom milling dues of the Informant stating that the Custom Milled Rice (‘CMR’) due of the Informant could not be released unless an insurance claim in relation to damage of stock was settled by the insurance company with OSCSCL.

Consequently, the Informant filed a consumer complaint before State Consumer Disputes Redressal Commission, Cuttack (‘SCDRC’) against the said insurance company and OSCSCL and obtained a decision in its favour. However, OSCSCL released a fraction of the due amount and debarred the Informant from participation in rabbi paddy procurement and operations for KMS 2017-18 without giving any reasonable justification. Later in 2018, OSCSCL issued a letter dated November 22, 2018, threatening the millers by dictating that the differential custody and maintenance charges arising out of revised duration pertaining to KMS 2017-18, would not be paid to the millers unless they executed the agreement for KMS 2018-19, in order to participate in procurement. The clauses of this agreement favoured OSCSCL.

The Informant made allegations against OSCSCL for non-payment of dues, unfair and discriminatory conditions in purchase of service, abuse of dominance and failure to maintain the “essential facilities” in an efficient manner.

The CCI defined the relevant market as ‘market for procurement of custom milling services for rice in state of Odisha’ and concluded that (based on market share) OSCSCL was dominant in the said market. Ultimately, the CCI ordered the DG to investigate the alleged abuse of dominance by OSCSCL.

[1] Case No. 16 of 2019, Order dated November 1, 2019

Published In:Inter Alia Special Edition- Competition Law - January 2020 [ English
Date: January 17, 2020