The Karnataka High Court has directed major Oil Marketing Companies (OMCs), including Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation Limited and Indian Oil Corporation Limited, to examine and decide on a representation submitted by a distillery seeking enhancement of its ethanol allocation for the Ethanol Supply Year (ESY) 2025–26.
The single-judge Bench of Justice N Nagaprasanna passed the order while allowing a writ petition filed by M/s Vinp Distilleries and Sugar Private Limited, a dedicated ethanol manufacturer, which challenged the reduction in ethanol allocation despite having established a plant exclusively for ethanol production.
The petitioner company submitted that its dedicated ethanol facility has an annual production capacity of about 9.90 crore litres. However, against its bid for supply of 9.26 crore litres during ESY 2025–26, it was allocated only 3.92 crore litres. The company argued that the reduced allocation was contrary to Clause 6.8 of the Long-Term Offtake Agreement (LTOA), which provides preferential treatment to dedicated ethanol plants.
Opposing the petition, Attorney General of India R Venkataramani contended that the preferential allocation clause and the obligation to make best efforts under the agreement could not be treated as an enforceable right entitling the petitioner to seek a writ of mandamus against the OMCs. It was further argued that Clause 6.8 was merely directory in nature and not mandatory.
The Union also submitted that ethanol procurement by OMCs was governed by the national ethanol procurement framework and policy guidelines issued by the Central government.
The AG submitted that any judicial direction resulting in increased allocation to one manufacturer could disrupt the policy objective of ensuring equitable distribution of ethanol across deficit and surplus states. It was argued that granting the petitioner’s request would effectively amount to judicial modification of government policy, which is impermissible in law.
After examining the matter, the High Court held that the petitioner had a legitimate expectation arising from both the contractual arrangement and the consistent conduct of the OMCs in previous years. The Court observed that dedicated ethanol plants, which were contractually restricted from manufacturing other products or supplying ethanol to third parties and were solely dependent on procurement by OMCs, could not be placed at a disadvantage in a manner causing substantial commercial prejudice.
The Court noted that the OMCs had themselves invoked Clause 6.8 to enhance the petitioner’s procurement allocation from 1.44 crore litres to 3.92 crore litres. Having relied upon the clause to increase procurement, the OMCs could not selectively apply the provision while refusing to consider a higher allocation sought by the petitioner.
Such an approach would render the contractual safeguard subject to arbitrary discretion, which would be contrary to settled principles of administrative and contractual law, added Justice Nagaprasanna.
Holding that the petitioner had made out a case for judicial intervention, the single-judge Bench directed the respondent OMCs to consider the company’s representation for enhancement of ethanol procurement in light of the observations contained in the judgment. It further directed that the representation be decided before any final decision is taken on the tender process already initiated. An appropriate reasoned decision should be passed within four weeks from receipt of the court order, added the Bench.
The post Karnataka High Court directs oil companies to consider distillery plea for higher ethanol allocation appeared first on India Legal.