Sunday, January 15, 2012

[CPSI NewsAlert: Cabinet Determines Importers Coordinated Price Hikes, Dismisses PAM Heads]

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Cabinet Determines Petroleum Importers Coordinated the Price Jumps, Dismisses PAM & Fair Competition Agency Heads

January 15 (summarized from Cabinet press release) Special Cabinet Meeting on Friday, 13 January 2012 discussed results of the inspection to determine the reasons behind the price increases in gasoline and petroleum products and dismissed officials determined of irresponsibility, according to a cabinet press release.

The press release states PM Batbold, through working groups created directly under him, conducted inspections into the matter and managed to stop the price hikes. Fair Competition and Consumer Protection Agency also conducted inspections into certain petroleum product importers and revealed that they raised prices after having discussed it amongst themselves.

Petroleum importers NIC (Petrovis), Petrostar, Magnai Trade (MT), Sodmongol Group, Shunkhlai Group, Just Oil, Oin Birj, M-Oil and Petrojamp met at the Ministry of Mineral Resources and Energy on 6 January and agreed to raise AI-92 gasoline prices up to 1,850, diesel to 1,885, A-80 to 1,550. They then soon after changed the prices, except where NIC, Petrostar, Petrojamp, and Sodmongol Group raised prices a few days later to rates 30-35 lower than the rest.

Inspectors compared the average Mongol Bank currency rate in November to that of January 7 rate of 1,429, thus determining the price increases merited to have occurred due to the currency fluctuation, to be 93 for A-80, 113 for AI-93, and 118 for diesel. And based on Naiman Sharga exchange rate of 1,475 on the same day, price increases to have occurred to be 133 for A-80, 163 for AI-92, 170 for diesel.

Importers raising prices by 235-260 per liter was ruled significantly higher than what the exchange rate volatility warranted, according to the inspection results. The inspection team also concluded that the above importers did not fairly reflect the import price and currency changes in their prices, based on documents provided by the suppliers and there being normal levels of petroleum reserves. Importers have also not paid their suppliers on time under contractual duties. So far they have paid $7.5m or just 11.7% of their obligations.

Inspection team also stated: "Importers coordinating to raise prices can be viewed to have violated Competition Law's Article 11.11 prohibiting "coordination of price increases in products"". In addition, the Working Group created by the Minister of Mineral Resources and Energy's Resolution #144 of 2009 does not have the power to negotiate and set changes in petroleum product prices. Therefore, the Working Group's decision to raise prices can be viewed to have no legal authority, the results find.

As such, in accordance to the law, fines equal to a certain percentage of last year's sales is being discussed for the above companies, for being found in breach of certain clauses of the Law on Competition.

Dismissal of Agency Heads Held Accountable

During the special cabinet meeting, after having been acquainted with the Fair Completion and Consumer Protection Agency's inspection results, majority of the cabinet members determined that relevant agencies did not take timely actions to prevent the price hikes. In particular, it was improper conduct for the deputy head and officials of the Fair Competition and Consumer Protection Agency to walk out on the clearly illegal discussions taking place in the Working Group meeting headed by the Deputy Minister of Mineral Resources and Energy B. Ariunsan, where they should have pointed out and stopped a wrong decision from being made.

Accordingly, the cabinet meeting decided to dismiss the head of the Petroleum Authority D. Amarsaikhan and the head of the Fair Competition and Consumer Protection Agency D. Mandakh, as well the their deputies Ts. Amaraa and Ts. Dorjpalam. Swift organizational measures needed to ensure the smooth running of government has been vested with the First Deputy Prime Minister and the Minister of Mineral Resources and Energy.

Link to the Cabinet press release (in Mongolian)

Disclaimer: I do not ensure the accuracy of this translation, thus it should not be used for distribution.



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