News Oil & Gas

Delhi HC upholds OMCs tender conditions for LPG cylinders


The Delhi High Court on Wednesday upheld the eligibility criteria fixed by the three leading oil marketing companies (OMCs) – Indian Oil Corp Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corp Ltd – for their tenders for procurement of LPG cylinders.

Under the eligibility criteria of the tenders, cylinder manufacturers having common business ownership or management, including sister companies, could submit only a single bid. This was challenged by a batch of petitioners led by Silica Udyog India and its sister concerns on the grounds that the eligibility criteria were arbitrary and curtailed the capacity of each manufacturing unit owned by them to independently participate in the tender process. And if not removed, it would have dire implications for them, potentially forcing them to withdraw from the marketplace altogether, they alleged.

However, the OMCs vigorously substantiated their positions by underscoring their prerogative to set the terms and conditions of the tender. They further rationalised the introduction of the restrictions articulating its nexus to the broader goal of procurement optimization.

A bench comprising Chief Justice Satish Chandra Sharma and Justice Sanjeev Narula accepted the stand of the OMCs holding that economic and policy decisions, especially those related to public procurement, must be guided by broader welfare and fairness principles. In this context, the ‘conflict of interest’ clause does seem to have a rational basis rooted in the realities of the liquefied petroleum gas cylinder market, it added.
Given that there is no evidence to suggest that the clause is arbitrary, discriminatory, or introduced with malafide intent, there is no compelling reason for judicial interference in this matter, the high court noted, adding that “in essence, the principle reaffirmed here is that courts should exhibit restraint and deference to administrative discretion in matters pertaining to tenders and policy decisions unless there is an apparent breach of established legal norms or principles.”According to the judgment, with supply overshadowing demand and the potential for an even greater imbalance in the future due to the long lifespan of LPG cylinders, it is crucial to manage the procurement process carefully. “In such a situation, if multiple units under the same ownership or management were allowed to bid separately, it could disproportionately benefit them, thereby defeating the principles of fair competition and equitable distribution. The impugned clause, in essence, safeguards the interests of the market as a whole, rather than a select few entities,” it stated.In 2016, Prime Minister Narendra Modi had introduced the Pradhan Mantri Ujjwala Yojana as a benevolent long-term economic strategy aimed at uplifting families from backward classes and communities categorised below the poverty line. The primary objective was to transition these families, who relied on traditional fossil fuels, to cleaner energy sources.The nationwide implementation of this policy resulted in an unprecedented demand for liquefied petroleum gas cylinders. To address this, the government, along with the oil marketing companies, initiated drives to engage more manufacturers from across the nation, ensuring consistent supply of cylinders at cost-effective rates, the judgment noted.


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