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India – CCI Directs Investigation Against REC Power Distribution Company Limited.

17 March, 2015

 


On January 13, 2015, CCI directed DG to initiate an investigation into the conduct of REC Power Distribution Company Limited (‘RECPDCL’) for alleged abuse of dominant position.
The informant submitted that RECPDCL is a wholly owned subsidiary of the Rural Electrification Corporation Ltd. (‘REC’), which is engaged in financing and promoting rural electrification projects across India. REC is also the nodal agency for the implementation of the Rajeev Gandhi Grameen Vidyutikaran Yojna (‘RGGVY’). RECPDCL, on the other hand, develops and invests in electricity distribution. It also provides consultancy services / execution of works in the above areas for other agencies / government bodies.

The informant alleged that there was a conflict of interest existing between REC and RECPDCL in the implementation of the RGGVY scheme. It was alleged that RECPDCL leveraged its association with REC to secure orders from various state distribution facilities on the verbalpromise that it could ensure trouble free approvals from REC on account of structural linkages. Further, it was alleged that officers of the REC were preparing detailed project reports (‘DPRs’) of various state distribution utilities on behalf of RECPDCL and also approving the same – hence creating a conflict of interest. It was also alleged that several states were awarding the DPR preparation work to RECPDCL on a nomination basis without any tendering process; which was eliminating competition in the market.

CCI determined that the relevant market for the instant case would be the market for financing of rural electrification schemes in the whole of India. CCI further held that REC, being a specialised institution for the financing of rural electrification scheme and the nodal agency for the RGGVY scheme (the flagship scheme for rural electrification), may be seen as a dominant enterprise in the relevant market.

CCI observed that REC had tried to use this dominant position in the market for the ‘financing of rural electrification schemes’ to manipulate competition in the market for ‘provision of consultancy services in power projects’ in favour of its subsidiary, RECPDCL. CCI further observed that the conduct of REC and RECPDCL amounted to denial of market access to other enterprises which had the capability of preparing DPRs for power projects.
Accordingly, CCI concluded that there existed a prima facie case that the conduct of REC and RECPDCL was in violation of the provisions of Section 4 of the Act and directed the DG to cause an investigation into the matter.

AZB    

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com

Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com

Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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