IOC-Adani to retail gas in Chandigarh, Allahabad

IOC-Adani to retail gas in Chandigarh, Allahabad

New Delhi: In a development that may set a trend, the Indian Oil Corp.-Adani Energy combine quoted zero pipeline tariff to bag the rights to retail CNG to automobiles and piped gas to industrial units in Chandigarh and Allahabad.

The Petroleum and Natural Gas Regulatory Board (PNGRB), which invited bids for city gas projects in seven cities, had asked companies to quote only the tariffs they will charge for transporting gas within the boundaries of cities and left the issue of settling the final selling price of the fuel to the firms.

People familiar with the development said firms are likely to make good the shortfall on account of the zero tariff by charging consumers higher CNG and gas prices.

The PNGRB on Monday opened price bids for the two cities to discover the IOC-Adani combine had quoted zero tariffs for 25 years in Chandigarh and seven years in Allahabad.

The regulator allows a five-year marketing exclusivity to the winning company, giving consumers no alternative choice.

After five years, an operator like IOC-Adani will have the pipeline exclusivity for 25 years, meaning no other company can lay a pipeline network and would have to necessarily request it to use its network to retail piped gas and CNG to automobiles.

But the regulations do not specify the extra capacity the operators would have to create in the system for usage by others and so third parties can be turned down on the pretext of no capacity, they said.

Interestingly, the PNGRB regulations do not have anything on protecting consumer interests.

Industry experts say if retail prices are not regulated and regulations create monopolies, the consumer interest is bound to be compromised.

The other bidding criterion is the length of a pipeline a company proposes to lay in a city and the number of consumers it proposes to sell the gas to.

In some cases, companies have indicated enrolling more consumers than the population in that area, again making a mockery of the PNGRB’s regulations, they said.

Sources said the IOC-Adani combine may have quoted zero tariff for Ghaziabad, the bids for which have not been opened yet.

In Allahabad, the IOC-Adani joint venture was in direct contest with GAIL Gas Ltd, the city gas subsidiary of state gas utility GAIL India Ltd. Chandigarh saw a four-cornered contest among IOC-Adani, HPCL, GAIL Gas and GSPC Gas.