ISLAMABAD – The Competition Commission of Pakistan (CCP), on Monday, issued a show-cause notice to Engro Vopak Terminal Limited (EVTL), for alleged imposition of unfair trading conditions.
A statement of CCP said that a formal complaint was lodged by Lotte Pakistan PPTA Limited (LP) against EVTL. In its complaint, LP alleged that EVTL was abusing its dominant position by charging an exorbitant price for its handling and storage facilities.
The CCP conducted a comprehensive inquiry in the matter, which revealed that EVTL has been granted exclusive rights for 30 years to handle and store all liquid chemicals entering the Port Qasim, through a concession agreement between EVTL and Port Qasim Authority. LP also entered into a storage agreement to provide handling and storage facilities for reception storage and delivery of acetic acid.
The report said that EVTL was charging an exorbitant rate of tariff and has recovered $133 million from its customer, LP, which was much more than the purported capital cost. In the financial model submitted to PQA at the time of grant of concession, EVTL provided the tariff structure to yield 18 percent IRR, based on capital cost for required handling and storage, nature of the product, related operating cost and product throughput and parcel size.
However, the tariff structure given in storage agreement between LP and EVTL fails to reflect any aforementioned basis and consequently IRR percent remains unascertained. After an enquiry, findings affirm that rent seeking from a captured customer has resulted in abuse of dominance by EVTL for imposition of unfair trading conditions on the customer, thereby, violating Section 3(3)(a) of the Act. The storage agreement is to expire in 2012 and both parties have entered into negotiations for its renewal as per their contractual terms.
LP has alleged that EVTL, after having recovered the capital cost and even total investment in the project from LP, was still demanding an excessive rate of tariff. As per findings of the enquiry report, such conduct of EVTL amounts to a constructive refusal to deal with its customer in contravention of Section 3(3)(h) of the Act.
The CCP has already issued show-cause notices to EVTL and Port Qasim Authority, holding them responsible for failure to seek exemption for the concessions agreement entered into between both parties, prohibited within the ambit of Section 4. As two different violations under the Act have occurred in respect of the same subject matter of concession agreement and also involve the same parties, the CCP may decide to consolidate hearings in both matters.
