New Delhi: The Petroleum and Natural Gas Regulatory Board (PNGRB) on Friday rejected state-owned city gas distribution company Indraprastha Gas Ltd’s (IGL) request to retain monopoly over Delhi’s gas pipeline network, allowing other players to enter the market.
PNGRB’s ruling is likely to encourage more competition in the supply of piped natural gas and condensed natural gas in the National Capital Region (NCR).
GAIL India Ltd’s subsidiary IGL was told to appear before the downstream oil and gas regulator in August in connection with its exclusivity in NCR.
PNGRB held that IGL’s period of exclusivity for managing NCR’s city gas distribution (CGD) network had expired in 2012, three years after it got the licence to lay pipelines.
After the ruling, IGL informed the stock exchanges that the issue of its exclusivity in Delhi is sub judice. “The Delhi high court vide order dated 30 September 2015 has directed that any order passed by the board (PNGRB) shall be subject to further order of this court," the company stated.
The regulator has a mandate to usher in competition in the gas transmission business, a sector prone to monopolies given that only one entity can lay pipelines in a particular geography.
To ensure that the monopoly in transmission pipelines does not deprive consumers of the benefit of competition in supply of fuel, PNGRB requires city gas distribution entities to reserve one-third of their pipeline capacity for other players who want to supply gas.
The new entrants in the business can utilize an existing transmission line for a user fee, which would delink the business of supply from transportation and bring in competition in the pricing of gas for consumers.
This is further to the first level of competition at the time of inviting bids from potential investors to lay pipelines.
IGL’s argument before PNGRB took the line that it should retain its exclusivity in NCR on several grounds, including the fact that the CGD regulations ran contrary to the PNGRB Act 2006 itself.
The Act required PNGRB to lay the principles for deciding the period of exclusivity, whereas the regulations prescribed a period of either three years or five years.
IGL argued this takes away PNGRB’s power to determine the period of exclusivity on a case-to-case basis.
It added that PNGRB had pre-determined the end of its period of exclusivity, before even hearing IGL’s side.