Live Mint Supreme Court rules PNGRB cannot fix gas retail

Live Mint Supreme Court rules PNGRB cannot fix gas retail

price The judgement came in response to the dispute between PNGRB and Indraprastha Gas


During the day, IGL touched a high of Rs.468.65, a level last seen on 22 January, rising as much as 16.5%, its sharpest gains since 1 June 2012. Photo: Mint


Mumbai: The Supreme Court (SC) on Wednesday turned down a plea by gas regulator Petroleum and Natural Gas Regulatory Board (PNGRB) contending that it has the power to fix the retail price of gas.

With this, companies supplying gas are now free to fix rates on their own. The regulator can only monitor prices to ensure fair competition amongst the parties that are supplying compressed natural gas (CNG) or piped natural gas (PNG) to consumers.

The judgement, passed by a bench of justices Dipak Misra and U.U. Lalit, came in response to the dispute between PNGRB and Indraprastha Gas Ltd(IGL), in which the gas regulator on 9 April 2012 asked the company to reduce its network tariff by 63% and CNG compression charge by about 59%.

“This landmark verdict is bound to be a big boost for the entire city gas distribution sector in the country which will now be looking at expansion in mission mode as per the vision of the government for providing clean energy solutions to the nation,” said Narendra Kumar, managing director, IGL, in a statement.

The regulator had moved the apex court after the Delhi high court on 1 June 2012 said the board did not have the authority to fix the retail prices. It had further said that the board cannot regulate or set any component of compression charge or network tariff.

The apex court on Wednesday reiterated this order and set aside the Petroleum and Natural Gas Regulatory Board (Determination of Network Tariff for City or Local Natural Gas Distribution Networks and Compression Charge for CNG) Regulations, 2008, stating that it was beyond the scope of its parent law, the 2006 Act.

“The power to fix tariff has not been given to the board. In view of that, the board cannot frame a regulation which will cover the area pertaining to determination of network tariff for a city or local gas distribution network and compression charge for CNG,” the 73-page judgement said.

The court said section 11 of the PNGRB Act, 2006, that excludes the board from fixing prices, is not accidental. Section 11 prescribes the functions of the board, which includes protecting the interest of consumers by ensuring fair competition between companies.

“Today’s verdict upholds IGL’s stand that PNGRB has no jurisdiction and paves the way for further capex (capital expenditure) and expansion of the market for IGL. It’s a big positive for IGL, although it was expected for a long time,” said an analyst with a domestic brokerage.

The cost of gas sold to consumers through a city gas distribution network has four main components—cost of gas, compression charge, network tariff and marketing margin.

After Wednesday’s verdict, any firm that sets up its own network and supplies gas to its own distribution centres will be allowed to fix network tariffs too, apart from the price of the other three components mentioned above.

During the day, IGL touched a high of Rs.468.65 on BSE, a level last seen on 22 January, rising as much as 16.5%. It closed at 455.30, up 8.98%. IGL, which began operations in 1998, is jointly promoted by state-owned GAIL (India) Ltd and Bharat Petroleum Corp. Ltd, which together own 45% of the firm.

Shares of GAIL gained as much as 2.3%, rising to Rs.401. Those of Petronet LNG Ltd gained as much as 5.4%, rising to Rs.197.05, while the Gujarat State Petronet Ltd scrip rose 6.2% to Rs.126.30.

Share Button