CUTS approaches competition panel against global potash cartel

Business Line, August 29, 2012

High potash prices may hit food production

Consumer advocacy firm CUTS has approached the Competition Commission of India against a global potash cartel operated by seven companies abroad. In its preliminary report submitted to CCI on August 25, CUTS said India is dependent on imports for its potash nutrient requirement. It imports entire requirement of over six million tonnes.

Indian companies have been bargaining hard for reduced prices for potash. Potassium is a one of the key fertilisers used in food production and is therefore severely impacted by the high prices of potash determined by the global cartel.

CUTS has appealed to the competition watchdog to undertake an investigation under Section 19 of the Competition Act. Under the Act, CCI can initiate action for an act taking place outside India that has or is likely to have an appreciable adverse effect on competition in India vide Section 32 of the Competition Act (the effects doctrine) against the global potash cartel.

CUTS cited a study by competition expert Frederic Jenny who estimates that if India imports an average of 6 million tonnes of potash a year during 2011-20, the significant overcharge it would end up paying would be financed to a large extent (50-100 per cent) from a $1.5-billion (Rs 68,400 crore) annual subsidy granted by the Government.

Indian negotiators have been requesting a 10 per cent discount on spot prices, which are currently around $500 per tonne. They have claimed in the past that if deal between $445 and $450 per tonne is not struck, they will explore other options.

Meanwhile, a case has been revived by a US court in a ruling dated June 27, 2012 against the cartel which comprises seven companies, one of which is based in the US. The US operates explicit exemption for export cartels under the Webb Pomerene Act of 1918. India along with several other jurisdictions provides an implicit exemption.

An International Fertiliser Association report said globally around 30 potash-related projects are planned for completion between 2011 and 2015.

North America will be the world’s largest supplier by 2015, with a 39 per cent share of potential world supply, followed by East Europe and Central Asia (29 per cent), West Asia (eight per cent) and Latin America (five per cent).

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