The Hindu Business Line : Draft gas pipeline policy may allow open bidding

GAIL (India) Ltd, a dominant player in gas transmission and pipeline projects, may soon face competition from other players, as the Petroleum Ministry's draft gas pipeline policy may seek to allow open bidding for all future pipeline projects.

The open-bid mechanism proposed in this policy will allow interested companies to propose and participate in pipeline projects, thus breaking the monopoly of State-owned companies.

Currently, most of the gas pipelines are built by GAIL. Although the Government has given its nod to Reliance's plan to set up a gas pipeline, lack of policy direction has deterred other interested players from coming in. To ensure a fair mechanism for bid evaluation, a committee would be constituted, a senior Petroleum Ministry official said.

Currently , a mechanism has only been worked out for city gas projects, he said.

The pipeline policy, which is expected to be taken up shortly, provides for the regulator to set a ceiling rate for transportation charges. Companies will be free to offer rates at different levels as long as it is under the ceiling. The policy will cover cross-country pipeline operators and city gas distribution companies. The policy is being brought in as several investors have been awaiting a clear policy guideline in this regard.

The policy would provide proper linkage between gas sources and market centres, along with inter-connectivity for regions, consumers and producers.

With the Petroleum and Natural Gas Regulatory Board (PNGRB) Bill at an advanced stage of consideration in Parliament, the Petroleum Ministry is set to approach the Cabinet with the draft gas pipeline policy. Since the policy envisages the appointment of a regulator under the PNGRB Bill for regulating the transmission, distribution, supply, and storage system for natural gas/liquefied natural gas and for promoting the development of the sector, the Ministry had decided to wait.

The regulator would ensure access to gas pipelines, based on a non-discriminatory common carrier principle for all users. It would also approve the pipeline tariff for the common carrier pipelines.

In the gas pipeline policy, the Government is considering the possibility of doing away with the cost-plus approach adopted by pipeline companies for calculating transportation charges. Pipeline transportation charges are important, as they constitute up to 40 per cent of the gas cost in some cases. The proposed ceiling rate will be calculated so as to discourage profiteering, the official said. The Tariff Commission, which had gone into the current transportation charges, has raised questions over the existing pipeline tariffs.

RIL awards parts of project contracts

RELIANCE Industries Ltd (RIL), which has been granted permission to lay gas pipelines, has already awarded a major part of its project contract on a cross-country basis for construction of pipelines.

The company is confident of completing the project on schedule, a company official said.

The company was granted permission to lay the pipelines as they have resources and market tie-ups. The Government gave a go-ahead to RIL in the light of the demand potential, which exists in major industrial centres along the pipeline network and the availability of gas from the KG Basin.