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THE DRAFT POLICY for development of the gas pipeline network proposed by the Petroleum Ministry last week is incompatible with the current environment of deregulation and free play of market forces. The policy proposes that all inter-State trunk pipelines will henceforth be built only by a government-notified company and in the instant case that would be GAIL India. Second, gas producers can directly sell to consumers through their own pipelines only up to a distance of 100 km from the well-head, or the landfall point for offshore gas. And, again, this has to be with the permission of the Regulator, for now the government. On both counts, the policy appears flawed and if implemented, will take the industry back to the dark ages of government control and monopoly.

There appears to be no compelling logic behind the proposal that only a government-notified company should lay trunk pipelines. Why should any other player in the industry with access to gas reserves and the financial and technical competence to implement a major pipeline project not be permitted to do so? By notifying GAIL India or any other company as the one that can implement such projects, the Government is only aiding the creation of a monopoly in the pipelines business. Indeed, the choice of GAIL India, even if temporary, is questionable on several counts. First, GAIL is a major player with interests in gas processing and distribution, and to vest it with responsibility for implementing common-carrier trunk pipelines could lead to a conflict of interests. Second, GAIL is transforming itself into an integrated player in the gas sector by acquiring equity in gas fields abroad and strengthening its presence in such related areas as petrochemicals. It would be unfair to dump a large resource commitment on the company now to implement projects that are not meant for it but for others. Third, GAIL is still a government company and by vesting it with the responsibility, the Government will be seen as unwilling to let go of the controlling strings. The logic behind the stipulation that gas producers can sell directly to consumers only up to100 km is also not clear. There is no reason why the Government should fetter players with such conditions in a market that is still nascent and developing.

Ideally, players in the gas sector should be free to chart their own plans for reaching the gas from the well-head to the consumers, irrespective of the distance. The Government should desist from micro-managing the sector, which is what the proposed policy, if implemented, would do. In a free market, the profit motive would ensure that the players adopt the best route to reach the gas to their consumers. The Government should restrict itself to framing rules that allow free and fair interplay of market forces. Designating roles for companies or stipulating norms for pipeline lengths are certainly not compatible with this objective.

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