Wednesday, September 28, 2022

Govt mulling new rules that will change the face of city gas distribution

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New Delhi: The Centre is considering bringing in new set of rules that will put an end to the monopolies enjoyed by various gas distribution companies in 34 cities, including New Delhi and Mumbai. It will give consumers the option to choose a new supplier as more players will enter the field, a senior officer from the Petroleum and Natural Gas Regulatory Board (PNGRB) said, according to a report by Reuters.

Why does a monopoly exist in the first place?

In 2009, PNGRB had given exclusive marketing rights, initially for a period of five years to companies that had established gas distribution networks in cities across the country. The regulatory authority had allowed the companies to use their pipelines for 25 years and recover the billions of dollars they had invested. However, the PNGRB is now thinking of opening up the sector to new businesses in order to bring in competition. “These companies have more than recovered their costs as indicated by their profitability and market cap,” said a board member, Satpal Garg, who looks after PNGRB’s commercial and monitoring responsibilities.

The timeline

The new rulebook is expected to be ready in three months and the implementation is likely to take another three months. The PNGRB first seeks feedback from companies and the public, Garg said.

Which companies are going to be impacted by it?

One of the biggest gas distributor companies that would feel the heat is state-owned Gas Authority of India Limited (GAIL). GAIL directly or indirectly controls many of single city distributors, such as Mahanagar Gas Ltd in Mumbai, Indraprastha Gas Ltd in New Delhi. In Gujarat, where gas distribution is undertaken primarily by Gujarat Gas Ltd, new competitors could move into the 11 cities where the company distributes gas — Jamnagar, Ahmedabad, Hazira, Surat and Rajkot in western Gujarat state. Apart from public sector, private sector monopolies, like that of Adani Gas Ltd, will also get impacted as new players will be allowed to enter into these cities.

Is liberalisation good?

The liberalisation could allow some better capitalised and more aggressive firms, including those associated with GAIL and Adani Group, to change the existing landscape.

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