Existing city gas players must compete post the end of market exclusivity: D K Sarraf, Chairman, PNGRB
New Delhi: Petroleum and Natural Gas and Regulatory Board (PNGRB), the country’s downstream regulator after concluding the mammoth 9th and 10th round of City Gas Distributionbids is now busy nurturing investors and streamlining the natural gas infrastructure and framework in the country, the regulator’s chief DK Sarraf told ETEnergyWorld in an interview. Also, Sarraf is of the opinion that it is necessary to enable competition after the end of the market exclusivity period of incumbent CGD players, Edited Excerpts…The regulator has published a concept paper on determination of transportation rate for CGD network and for CNG. What is the larger aim and the intent of the move?
City Gas Distribution entities are given marketing exclusivity for a certain period from the date of authorisation. This means that no one other than the authorised entity can carry out the CGD business in the area for which it has been given authorisation. This exclusivity is required to enable the CGD entity to create infrastructure and then recover a part of the cost of the infrastructure from the business before he faces competition in his area. PNGRB does not have the legal mandate to regulate the price of gas. Despite this, consumer interest, to an extent, is taken care of as the gas generally competes with other petroleum productions e.g. Petrol and diesel for transport, LPG for cooking fuel and Fuel Oil and Petcoke for industrial fuel. However, to fully protect the interest of consumers, it is necessary to enable competition after the end of the exclusivity period, as also provided under the law. PNGRB has initiated the process of drafting the regulation for declaration of end of exclusivity after considering the views of the stakeholders. We are open to suggestions. That is why we have floated a consultation paper. A lot of work is required to be done on this.
What is the status of the plan to create a natural gas trading hub?
On that plan, due diligence is almost complete. CRISIL has submitted its report. Our team has visited UK, US and Australia in order to understand and incorporate the best global practices. We are awaiting some more clarity on the policy front from the government. Once that happens we will be ready. We are in a state of preparedness. Obviously, the inclusion of natural gas in GST will help us have more clarity on the final contours of natural gas trading hub. Also, we are awaiting government to give direction on which kind of natural gas will be used in the trading hub — domestically produced, imported or natural gas extracted from difficult fields etc. There should be an update on these aspects soon as the new government has come.
What is on the regulator’s priority list after the successful completion of the 9th and 10th CGD rounds?
We have spent most of our time in discussing various issues and problems being faced by the winners of ninth and tenth round of CGD. There is a need to nurture investors and resolve their issues. So, the first-year time-frame for winners under the 9th CGD round ends on 30 September 2019. However, we are not waiting for the end date. To take a stock of the on-ground progress made by these companies, in the last month alone we held several meetings with all the stake-holders involved including natural gas pipeline operators. Next, we will be talking to states and UTs to address their concerns, if any. We are going to open a special online portal this month where the winners of the 9th and 10th CGD rounds would post their progress report and raise concerns, if any. Currently we are not thinking about the 11th CGD round. The overall infrastructure and ecosystem needs to mature for us to announce the 11th CGD round. Both the rounds have created a big demand for natural gas compressors, equipment, pipeline and skilled manpower. We have urged the winners to opt for domestic suppliers and we have been urging domestic manufacturing industry to take advantage of the robust demand.
Is PNGRB looking at un-bundling GAIL?
The government needs to take a call on it. Yes, there is a legitimate concern among many stakeholders on GAIL’s operation both in the marketing and transporting business. The government will have the final say in this and stakeholder inputs will obviously be taken. Certain operational problems will be resolved by un-bundling.
Is the regulator working on a new business model for operating natural gas pipelines?
For laying of pipelines and transportation charges we have not yet finalized on the new model. There are many models out there including, for example, the annuity model or the uniform tariff model and the entry-exit model. However, further deliberations need to be made in this regard.
A draft policy was floated for setting up LNG terminals recently. What is the latest on that front?
The industry had many concerns when it came to reserving spare capacity in LNG terminals as part of open access. We found some of the concerns to be legitimate post our own due diligence. So, we have recommended the government to remove the clause on providing open access to LNG terminals capacity. We have also made recommendations to the government on registration of LNG terminals and safety protocols to be followed as given in the rules. The government may now propose a new framework for things to take final shape.