Former Sebi chief Ajay Tyagi will head the commission to end gas exploitation and marketing.
The oil regulator has set up a committee under former Sebi chairman Ajay Tyagi to recommend ways to end the exploitation enjoyed by companies involved in the transportation and marketing of natural gas and city gas.
The eight-member committee has been asked to give its recommendations on desegregating entities involved in the transportation and marketing of natural gas, and ending the monopoly of city gas sellers where necessary, the Petroleum and Natural Gas Regulatory Board (PNGRB) said in an order. .
The team has been asked to submit its report in three months.
In mature markets, the energy infrastructure is operated with the same carrier policy that provides access to third parties. Any user or supplier can access any gas pipeline, regardless of who owns it.
But that is not the case in India where users and suppliers often complain about not getting access.
A few years ago the government had considered demerging state-owned gas company GAIL (India) Ltd by spinning off its pipeline business into a separate company and selling it to professional investors.
This is because GAIL owns more than two-thirds of the country’s pipeline network, making it a bottleneck in the market. GAIL is also the largest natural gas marketing company in the country and its users are always complaining about not being able to access the company’s pipelines to transport their fuel.
To resolve the conflict arising from the same entity due to the dual functions of transportation and gas marketing, a dual GAIL has been considered. But that plan was dismissed without explanation.
Similarly, city gas operators have monopolies in supplying CNG to vehicles and natural gas piped to domestic kitchens for cooking in several cities. Third parties cannot access their pipeline network if they wish to supply fuel.
The PNGRB has now established a committee to promote competition and provide a level playing field for gas transportation and distribution businesses.
In its September 10 order, the regulator said the PNGRB Act of 2006 authorizes it to ensure the separation of activities related to natural gas marketing and transportation including pipeline ownership in case the entity is involved in both natural gas marketing and pipeline laying and operation.
The PNGRB said its rules state that “if a company is involved in both the marketing of natural gas and the laying, construction, operation or expansion of natural gas transportation pipelines, it shall, on or before March 31, 2017, create a separate legal entity that carries out the transportation activity of natural gas is made by that separate legal entity and the right of first use shall be vested in the agent of that separate legal entity.” However, this goal has not been achieved, it said.
In addition, ending the uniqueness of city gas licenses was important to open up the gas market but the regulator faced difficulties to declare the license area as a common company area when the exclusivity period expired.
“The declaration of the country’s territories as a common company or contract company is important to introduce fair competition and efficiency in the city gas distribution sector, which may benefit the end consumer,” PNGRB said.
The PNGRB said it has formed an expert committee under Tyagi, who previously dealt with gas issues when he served as chief executive officer in the Ministry of Petroleum and Natural Gas.
Other members of the committee include AK Purwaha, former chairman of Engineers India Ltd, Shaleen Sharma, former head of BG India, and Sanjay Sah of Deloitte.
“The main objective of the committee is to analyze the global processes related to the separation of transportation and sales including pipeline ownership in the natural gas sector, to assess the current situation in India, and to recommend appropriate measures to ensure the effective implementation of the separation of transportation and marketing activities in the natural gas sector,” he said.
The panel was asked to provide “a feasible model for the separation of transportation and sales in the natural gas sector including pipeline ownership.” It will also “give practical recommendations to review the framework for specialization in the city gas distribution (CGD) sector” and “suggest ways to address legal challenges and ensure a fair and competitive market”.
The committee will also suggest “methods for geographical locations where only placement, construction or expansion of CGD network”.
