As the tussle between Petroleum and Natural Gas Regulatory Board (PNGRB) and city gas distribution (CGD) companies intensifies over marketing exclusivity, the regulator will soon start hearing these entities on a case-to-case basis over freedom to continue selling natural gas without any competition.

CGD companies have two types of exclusivities for selling natural gas. One is marketing, allowing exclusive rights to sell gas for 7-8 years. Second is infrastructure, allowing exclusive use of pipelines for 25 years.

“PNGRB is only looking at marketing exclusivity at present. The intent of the board is to call for hearing companies whose marketing exclusivity has ended. The idea is to open the system for promoting competition which will eventually benefit the end consumer,” said PNGRB officials.

The Board will now hear these companies and then decide on whether to extend the marketing exclusivity or to end it. Even, if their exclusivity ends, around 20-25 per cent of the cumulative capacity will be opened to other players, they added.

Also read
The Hindu

PNGRB forms high-level panel to tackle issues of competition, level playing field in CGD sector

Area of contention

The issue of marketing exclusivity has been an area of contention between the CGD companies and the regulator for the past several years and is now in the Delhi High Court.

Asked about the issue being in court, a senior PNGRB official said, “The court told CGD companies that it will hear them on the new guiding principles but is not stopping PNGRB from conducting its hearings.”

The regulator told the court that CGD companies do not respond to notices for hearing. To which the court has said that the companies will have to respond to the hearing notice.

“The board has full freedom to hear them, but whatever it decides cannot be implemented until the High Court arrives at a decision,” the official added.

The issue relates to declaring pipelines transporting natural gas as common carriers or contract carriers. It will impact companies such as Indraprastha Gas (IGL) and Mahanagar Gas (MGL) serving the geographical areas (GAs) of Delhi and Mumbai, respectively, as their marketing exclusivity ended in 2012.

The PNGRB Act allows the regulator to ensure separation of activities related to natural gas marketing and transportation including ownership of the pipeline in case an entity engages in both marketing of natural gas and laying, building, operating or expanding a pipeline for transportation of natural gas on common carrier or contract carrier basis.

When contacted, the Ministry of Petroleum & natural Gas (MoPNG) declined to comment. A top ministry official said that since the matter is in courts the Ministry will give its response to the court.

Companies’ concern

The CGD companies said that there is no clarity on which networks will be first impacted and how access capacity will be divided among the existing and incoming entities.

Also, the new entities entering the system should not “cherry pick” the GAs and that they should also be given mandates to develop GAs where revenue generation initially is a challenge such as hilly and remote terrains. Besides, what are the new type of players entering the system and what “mandatory responsibility” will be given to them.

“One principle cannot be implemented for all,” said one of the CGD players.

However, according to PNGRB with respect to both marketing and infrastructure exclusivity the right of first use does not mean preferential access.

Related Topics