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Plans redrawn to end city gas distributors’ monopoly
The downstream regulator is planning to end marketing monopoly of Indraprastha Gas, Mahanagar Gas, Gail Gas, Gujarat Gas and more city gas distributors in at least 30 license areas by declaring their network as ‘common carrier’, which would force them to reserve a part of their capacity for third party, people familiar with the matter said.
In the next few months, the Petroleum and Natural Gas Regulatory Board (PNGRB) will likely be ready with a regulatory framework for elimination of monopolies, they said.
“If you look around, every monopoly or oligopoly has certain checks – in the power sector, there is regulatory oversight on tariff while in the telecom sector, limited competition keeps tariff in check – but in city gas, the monopoly is unfettered,” a person familiar with the thinking at PNGRB said.
Several CNG and piped cooking gas distributors have enjoyed exclusive marketing rights far longer than the usual 3-5 years that licenses permit. Introducing competition was necessary for market efficiency and increased consumer benefit, the person said.
Plans redrawn to end city gas distributors’ monopoly
PNGRB is unlikely to terminate all eligible monopolies in one go. “The regulator will pick one or two cases in the beginning as test cases,” the person said. “Obviously, there will be challenges by the affected companies and that will have to be overcome, which will also make the process more robust.”
The regulator’s attempts at ending monopoly in previous years failed as distributors relied on the absence of a regulatory framework to stonewall such a move. Which is why PNGRB is now arming itself with a regulatory framework for this.
The board will have to publish its intent to end marketing exclusivity and then hear the distributor as well as other stakeholders in a fixed timeframe before taking a final decision on this, as per a draft regulation for declaring city or local natural gas distribution networks as common carrier or contract carrier it had floated in August last year.
Once a network is declared a common carrier, the distributor will have to reserve a fifth of its capacity for third parties, including suppliers and customers, as per the draft.
Existing CNG stations will continue to be exclusively operated by the licensee. But third-party entities can install new CNG stations, which will be permitted firm access by licensees. CNG stations shall receive natural gas only through the city gas network of the authorised entity.
The license holder shall declare on its website its own requirement and the capacity allocated on a firm contract basis which may be verified by the PNGRB every month or at any other intervals the board desires, as per the draft.
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