Ajay Tyagi-led panel to suggest ways to split marketing and transport companies, end city gas monopoly

New Delhi: The Petroleum and Natural Gas Regulatory Board (PNGRB) has set up a committee to recommend ways to resolve the two most contentious issues in the domestic natural gas sector: splitting entities that engage in both transport and marketing of gas and ending the monopolies of city gas distributors where required.

The eight-member panel will be led by Ajay Tyagi, former chairman of market regulator Sebi, and it is expected to submit its report in three months.

Several companies have complained that bundling of transportation and marketing activity has been stifling growth of the domestic gas market as it doesn’t allow a level playing field. GAIL and GSPC engage in both gas marketing and transportation.

“Section 21 of the PNGRB Act, 2006 mandates PNGRB to ensure separation of activities related to natural gas marketing and transportation,” the regulator said in a memo announcing the setting up of the panel, which will analyse global practices and hold larger consultations with industry before making recommendations.

The committee will “formulate recommendations for PNGRB, including possible models for separation of transportation and marketing activities in the natural gas sector including ownership of the pipeline, implementation strategies, and measures to address identified challenges,” the regulator said.

In addition to separating transport and marketing, “the issue related to exclusivity in city gas distribution (CGD) is also of paramount importance for opening up the gas market,” PNGRB said.A licence to distribute gas in an area gives the distributor a monopoly over laying pipeline networks and using them for a certain number of years. But past attempts by the regulator to end the monopolies and declare city gas networks as common carriers have found little success and often ended in litigation. The regulator wants the committee to find a way out of it.The committee will provide “actionable recommendations for revising the exclusivity framework in the city gas distribution (CGD) sector” and “suggest measures to address legal challenges and ensure a fair and competitive market.”

It will also recommend “pathways for geographical area where exclusivity for laying, building or expansion of CGD network has ended.”

The regulator said it wants to “balance” the interest of distributors with that of consumers. “The declaration of geographical areas as a common carrier or contract carrier is essential for ushering in fair competition and efficiency in the city gas distribution sector, which may benefit the end consumer as well as authorised entity,” it said.

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