Officials said the regulator’s move to recognise 54 gas pipelines as common carriers has faced multiple litigations till now from private entities, such as Adani Total Gas and even state run-GAIL
Marred with litigations from both public and privately owned entities, the Petroleum and Natural Gas Regulatory Board (PNGRB) is considering to halt its action on city gas distribution (CGD) companies.
The regulator has decided to not take forward its plan to classify city gas pipelines as ‘common carriers’ until the PNGRB Act is amended to give it more legal backing, officials told Business Standard.
Officials said the regulator’s move to recognise 54 gas pipelines as common carriers has faced multiple litigations till now from private entities, such as Adani Total Gas and even state run-GAIL. The PNGRB has increasingly sought to break up the marketing monopoly of distributors, such as Indraprastha Gas, Mahanagar Gas, Gail Gas, Gujarat Gas, and others. “The Act needs to be amended to give it more legal backing to deal with the many challenges it has faced,” a senior official said.
Back in 2015, the process of declaring certain CGD areas as common carriers had begun. But since the process was not automatic, the regulator had in 2020 created guiding principle regulations based on which individual areas have been declared as common carriers. The Guiding Principles for Declaring City or Local Natural Gas Distribution Network as Common Carrier or Contract Carrier) Regulations, 2020, had been notified in September of that year. The new regulations aimed at ending monopolies of CGDs in 54 urban areas where they had already exceeded their exclusivity period. For cities like Delhi and Mumbai, the exclusivity period had expired back in 2012. However, the courts have called the action ‘ultra vires’ and pulled up the regulator for acting beyond its legal power and authority, officials pointed out.
“Many of the notices sent by PNGRB to gas entities mandating common carrier status under the regulations have ended up in court, and some have been stayed. This has held up the process significantly,” an official said.
Key among these have been the Delhi High Court staying PNGRB notices issued to Adani Total Gas for its CGD network in Ahmedabad city, Daskroi, and Khurja in Gujarat, as well as notices sent to GAIL’s subsidiaries.
The government recognises natural gas pipelines as either contract carriers where capacity is made available to any other entity under a firm contract, or as common carriers where the original licensee has to permit about 20 per cent or more of its network capacity for use by other suppliers normally for a period of less than one year.
Natural gas pipelines are a widely accepted mode of bulk transportation of natural gas from a source to a delivery point over a particular route. The concept of natural monopoly in transportation of natural gas is universally accepted given its capital intensiveness and safety factors.
However, the government has increasingly pushed for the “common carrier” principle which will allow all producers and consumers access to fuel transport infrastructure by appointing independent gas pipeline operators.
As part of the plan, a transport system operator (TSO) would be incorporated to manage the gas pipeline infrastructure’s common carrier. The TSO will be entrusted with the task of booking pipeline capacity for gas transport from producers to consumers on payment of a fee, to be decided by the regulator.
The city gas companies have stated any move infringing on their infrastructure exclusivity will severely harm their businesses, while also allowing third party marketers and shippers to cherry pick customers and charge much higher for gas, often to the highest paying buyer.