City gas distributors may lose exclusivity

Ambanis and Adani group are among those in the fray

NEW DELHI: If a draft regulation by the Petroleum and Natural Gas Regulatory Board (PNGRB) comes into force, gas consumers will have more choice.

Existing city and local gas distributors (CGDs) in Mumbai, Delhi and Gujarat — Mahanagar Gas Ltd (MGL), Indraprastha Gas Ltd and Gujarat Gas, respectively — may lose exclusivity to  players like Reliance Industries Ltd, Reliance Energy Ltd and the Adani group, if the regulation is enforced.

In fact, if the draft is to be followed, the existing players may even have to seek authorisation from the regulator.

“It is a matter of interpretation now whether these companies are deemed to have authorisation or they will have to seek authorisation,” said a senior official.

The draft guidelines have also proposed that CGD entities in existence for three years will get exclusivity for additional three years and those for less than three years will get additional five years.

In another significant proposal that could affect the eventual consumer price for compressed natural gas (CNG) and piped natural gas to households, the draft said that transportation tariff of city or local natural gas distribution network would be determined on three principles.

These would be a reasonable rate of return on investment, investment resulting in the creation of an efficient and safe infrastructure and the normative level of operating expenses required for efficient operation, including quality of service of the network.

For other kinds of players, the economic life of infrastructure from an appointed date, proposed to be October 1, 2007, will determine their exclusivity.

The Union government had notified the establishment of the board on the proposed date.

While IGL is a 50% partnership of government-owned companies and the Delhi government, MGL and Gujarat Gas are joint ventures of British Gas. IGL and Gujarat Gas are also listed on the Bombay Stock Exchange.

“The CGD project consisting of a network of pipelines and other allied equipment and facilities is normally expected to have an economic life of 25 years,” said the draft.

During such period, the authorised entity is required to carry out further expansion through pipeline capacity building and CNG infrastructure as well as carry out
replacements and upgradation of existing assets and facilities.