Oil regulator opposes govt’s move to give GAIL the run of Eastern gas grid

The Petroleum and Natural Gas Regulatory Board has opposed the Centre’s order to grant State-owned GAIL monopoly rights to develop the triangular Eastern gas grid and distribute city gas in the region, avoiding the competitive bidding route.

Backed by legal opinion, PNGRB has concluded that such an authorisation, which would be a contradiction of the objectives of the regulation and infringe upon the autonomy of the regulator, would require an amendment of Section 42 of the PNGRB Act.

The regulator has published the detailed communication in this regard with the government on its website in response to an RTI query. BusinessLine had pointed to the fallacies of the government decision in early October.

On September 21, the Cabinet approved the estimated ₹12,940-crore Jagdishpur (UP)-Haldia (West Bengal) and Bokaro (Jharkhand)-Dhamra (Odisha) pipeline with 40 per cent viability gap funding by the Centre.

The project was to supply gas to three fertiliser plants at Gorakhpur (UP), Barauni (Bihar) and Sindhri (Jharkhand), which the Centre had decided to revive through a consortium of companies led by Coal India and NTPC.

Though not stated clearly, gas was expected to be primarily sourced from the proposed LNG terminal at Dhamra port by a 50:50 joint venture between Adani Group (which owns the port) and GAIL and IndianOil. The government wanted to have undisputed rights to distribute gas in major towns and cities in the region including in Varanasi, Patna, Ranchi, Jamshedpur, Bhubaneswar, Cuttack, and Kolkata.

In its October 18 communication, the Ministry of Petroleum and Natural Gas asked the PNGRB to allow GAIL to change the pipeline’s configuration including route length and size. The gas tariff would be decided by the Ministry or a directive would be given to the PNGRB. Also, the regulator was not to allow a a captive Dhamra-Paradip pipeline without the Ministry’s approval.

The last point is a non-compett clause, which means users in this region will be forced to take GAIL’s services. Also, allowing the operator to change the pipeline configuration would choke competition such as the like Hiranandani Group, which proposes to build a floating terminal near Haldia in West Bengal. Gas from the project was to be evacuated by pipeline to Bangladesh, West Bengal and Odisha.

In its October 25 response to the Ministry, the PNGRB said that affording such flexibilities goes against precedence; natural gas pipeline operators do not have an automatic right to city gas distribution. It said that defining the project configuration is mandatory and that the regulator promotes multiple connectivity to ensure evacuation. It cited the multiple pipelines operating in Gujarat on the same route or from the same source.

It may be mentioned that the PNGRB auctioned a pipeline from Haldia to Paradip via Dhamra. Four parties, including IndianOil, Adani and the Hiranandani Group, participated in it. There appears to be interest among industry players to build gas grids in the region and such projects can come up without Viability Gap Funding, through the competitive tariff bidding route.

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