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Explainer: Gas sector needs sound regulation
In the downstream sector, the Petroleum and Natural Gas Regulatory Board (PNGRB), set up under the PNGRB Act, 2006, regulates the laying/expanding of transmission pipelines for gas and petroleum and city/local gas-distribution networks.
India’s gas economy is facing severe constraints owing to stagnant domestic output. While a high-level panel recently backed pricing freedom, issues relating to regulation of pipeline networks also need addressing. Against this backdrop, there are plans to amend the PNGRB Act. Rajat Mishra takes a look at the gas-economy norms.
The directorate General of Hydrocarbons monitors upstream operations. It enforces production/revenue-sharing contracts with private operators. In the downstream sector, the Petroleum and Natural Gas Regulatory Board (PNGRB), set up under the PNGRB Act, 2006, regulates the laying/expanding of transmission pipelines for gas and petroleum and city/local gas-distribution networks.
An entity that lays the pipeline will have the right of first use, and others must pay it for use of the pipeline. Businesses must register with the PNGRB to market petro-products and natural gas, set up/operate terminals and storage beyond specified capacities. PNGRB orders can be challenged before the appellate electricity tribunal, and then courts.
The PNGRB can impose fines up to Rs 250 million for non-compliance, with additional fines of up to Rs 1 million for every day of continued contravention of orders. Wilful failure to comply with appellate tribunal orders may draw a fine of up to Rs 10 million; subsequent offences will attract fines up to Rs 20 million, and continuing contravention, fines of up to Rs 2 million/day.
The board lacks a clear mandate to ensure competitive gas markets. Gas price is regulated separately by the Centre. While many back scrutiny of costs, others say free pricing will ensure more upstream investment, and competition will foster fair play. The PNRGB also can’t ensure retail service obligations. It is also argued that the pipeline tariffs fixed by it on the basis of common carrier principle don’t incentivise efficiency much. The regulator is also not seen as having been effective in thwarting monopoly creation in city gas distribution.
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