The probe into the pricing policy comes close on the heels of a recent hike in the domestic PTA prices in October, after the global prices of PTA took an upswing. Reliance had already been hauled up by the DGIR for its pricing mechanism when the domestic PTA prices had been fluctuating tremendously.
Officials at the directorate general, which is the investigative arm of the Monopolies and Restrictive Trade Practices Commission, allege that the PTA prices were increased in the domestic markets as a consequence of the international price hike, though domestic cost of production has remained unchanged.
Reliance Industries, with an installed capacity of 2,50,000 tonne of PTA, is a major player in the market. In fact, the company is commissioning another 3,50,000 tonne-plant in the near future, which would make it one of the biggest PTA producers in the world.
The domestic price of PTA has simultaneously followed the abnormal increase in the global price of PTA even though domestic cost of production had not increased significantly.
From $1300 per tonne in May 1995, the spot price of PTA in the international markets had increased to $1700 per tonne in July 1995. The price had then fallen to $700 per tonne in May 96 and now, from October 96, it has again started rising.
According to the MRTP Act, any monopoly producer comes under its purview only if it distorts its price level or accrues unreasonable profits by dint of its position in the market.
According to the probe letter forwarded to the company, the DGIR has asked for the reasons for the PTA price increase, indicating categorically the present ex-factory cost, margin of profits, selling expenses, excise duty and other taxes.
The DGIR has also enquired about the relevant import prices of PTA, corresponding on the date of recent price increase by Reliance.
This, according to the officials, would enable them to analyse whether the price differential between domestic and international prices have induced the company to increase its price even though its cost of production have not increased.
The information has been called for under section 11(2) of the MRTPC Act.
