The Hindu Business Line : Marketing exclusivity for city gas distribution under study

The Ministry of Petroleum and Natural Gas is weighing various options on whether to allow marketing exclusivity for development of city gas distribution (CGD) network.

The segment, which is dominated by State-owned companies such as GAIL (India) and Gujarat State Petroleum Corp, is now seeing private sector players like Adani and Gujarat Gas Co, which are giving tough competition. Reliance Energy is also all poised to tap the market.

At a recent meeting on `Draft Natural Gas Pipeline Policy' convened by the Ministry, the stakeholders emphasised that the policy needs to be finalised. They called for early setting up of Petroleum and Natural Gas Regulatory Board, as some of the State Governments were issuing no-objection certificates or provisional approvals for developing CGD networks in the cities on their own.

For exclusiveness

Many participants were of the view that marketing exclusivity should be provided for the development of CGD network in the country.

It was also pointed out that in almost all developed markets, marketing exclusivity had been initially allowed before it was gradually phased out. According to sources, examples from various countries in this regard were narrated at the meeting.

However, contrary view stating that marketing exclusivity should not be allowed was also expressed, sources said. Allowing marketing exclusivity may provide an opportunity for the entities to cross subsidise network tariff by profit from gas sales, it was felt.

It would also restrict the participation of entities in the CGD network. Sources said that the Ministry would examine both the viewpoints before forming an opinion.

On the issue of providing 33 per cent extra capacity in gas pipelines, it was felt that this might not be required, as it could be achieved through increase in compression, looping etc. Besides, cost of this extra capacity after netting out the proposed infrastructure status benefits may still result in higher pipeline tariffs on account of stranded capacity.

However, the stakeholders clarified that the tariff may not increase in the same proportion as the cost of providing extra capacity, which may be required for meeting future demands.

With regard to the issue of separating gas marketing and transmission business of entities engaged in both, the Ministry held that it should be left up to the proposed regulatory board. There were suggestions from some stakeholders that a timeline for bifurcation of the gas marketing and transportation business may be provided, sources told Business Line.

Other issues

Some of the other points discussed at the meeting included the issue of pipeline specific consumer as well as the suggestion on regulation of all pipelines by the Board. It was decided that clause on `categorisation of pipelines' be deleted from the policy, as the players felt that it would be difficult to differentiate between various product categories.