Hyderabad: The bidding process for India’s much awaited city gas distribution or CGD networks may begin in a month and authorization for the networks may start by March 2009, says Labanyendu Mansingh, chairman of the Petroleum and Natural Gas Regulatory Board, or PNGRB. He estimates inflows of around $49 billion (about Rs2 trillion) into the sector over five years.
Conceding that the petroleum ministry’s policy of priority gas allocation to fertilizer and power generation firms goes against the spirit of free market competition, Mansingh said in an interview that he is asking the ministry to ensure adequate gas supply to CGD networks. Edited excerpts:
What has been the response to the expressions of interest (EoI) called for CGD networks?
Early days: L. Mansingh believes the total estimated investments in city gas distribution network will touch $49 billion over the next five years. Bharath Sai
We have so far received 71 EoIs from global and domestic players including Reliance Industries Ltd, GAIL and the existing CGD players that were permitted by the government before the regulator was formed. We want more competition in the market and are accordingly conducting roadshows to encourage more players to enter the segment so that it benefits consumers. We expect more players to enter the fray once we start the bidding process.
When will licences be issued?
We plan to begin the bidding process in about a month’s time... We expect to begin issuing authorizations to CGD network players by March 2009. The players are expected to begin distribution activities within six months from then. In the first phase, six states of Andhra Pradesh, Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh and Haryana will have CGD.
How will you ensure fair play since some gas producers plan to enter transportation and distribution?
We are taking adequate measures to ensure that the gas producers do not favour their own transportation and distribution entities and discriminate (against) other players. Enough regulations are specified through Affiliate Code of Conduct where the CGD players will have non-discriminate third-party access to the gas pipeline infrastructure.
What kind of investments are expected in the CGD segment?
The broad figure of investment that was projected in the Planning Commission document was $39 billion, which we now think will exceed by another $10 billion, taking the total estimated investments to around $49 billion over the next five years.
How will you ensure availability of gas to CGD networks since the petroleum ministry is planning a preferential gas allocation policy for the fertilizer industry and power sector?
Our stand has been that gas allocation policy will distort the market. In fact, Section 11A of the PNGRB Act says that it is the responsibility of the board to ensure that there is free and competitive market among entities. We were not consulted in the matter of gas allocation policy.
However, we wrote to the ministry. We have said that in case the ministry goes ahead with preferential gas allocation policy for whatever reasons, it should allocate adequate quantity of gas to the country’s CGD network. The CGD network does not require huge portion of gas allocation and it benefits millions of consumers in the country, upgrades their quality of life and brings down pollution levels.
What has been the the response?
The ministry is believed to have decided to accord sizeable priority to CGD network by placing it on a par with the power generation sector after fertilizers in gas allocation. The (allocation) the ministry is willing to provide to CGD network should ensure adequate gas supplies for at least two-three years...
Do you have any say in control over prices of petroleum products and natural gas?
According to Section 11F of the PNGRB Act, we shall monitor the prices of petroleum products and prevent restrictive trade practices. This section is applicable only to the notified petroleum products and natural gas and we come into the picture only when the government notifies the products. However, the government has not yet notified any of these products.
How will you ensure competition in the absence of the ministry not notifying the products?
We did receive a formal complaint from some of the private sector players that include Reliance Industries, Essar Oil and Shell India against the public sector oil companies alleging unfair and restrictive trade practices in sale of transportation fuels and predatory pricing.
A bench has been constituted and hearing is going on. Although the price per se is not within the purview of the regulator now, we can intervene under the other provisions of the Act that gives us mandate to promote a competitive market.
Do you think you need more teeth to handle such cases effectively?
It is less than a year since the regulator has come into existence... It has to first establish its credibility and effectiveness with the public and the market. The moment it is felt that the regulator is good for the economy and industry, there will automatically be pressure on the government to give (the regulator) more powers.
I am of the view that a good regulator should bare its teeth but never be required to bite. We wish our industry will attain maturity...with least regulation. There are enough provisions for us to act effectively.