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City gas sector may finally seem some competition


Consumers may soon have the power to choose between multiple operators of piped natural gas (PNG) and compressed natural gas (CNG) fueling stations in different markets, where single operators have so far operated without competition.

Referring to this possibility, Petroleum and Natural Gas Regulatory Board (PNGRB) chairman Anil Kumar Jain said mint that the regulator would soon roll out new rules to allow multiple natural gas operators to compete in different markets, especially those where infrastructure and marketing exclusivity for individual companies has ended.

“However, it will be confirmed that there will be no impact on existing companies, such as new companies getting rid of attractive locations (which are more in demand and more people), and that the new companies are ready to serve remote and underserved areas,” said Jain. , adding that the market would be opened up through an open and fair process.

Infrastructure exclusivity refers to the exclusive right not only to use existing pipelines and related infrastructure, but also the right to establish new infrastructure in designated areas, while marketing exclusivity refers to the right to market and sell CNG and PNG only in allocated areas . Exclusivity periods vary across licenses. The maximum period for infrastructure exclusivity is 25 years and eight years for marketing.

The regulator had to bring back a similar effort in fiscal year 2021 after pushback from incumbents, so the new plan could also backfire. If successful, it would end the dominance of individual natural gas operators, and enable consumers to choose gas suppliers.

Emailed queries to Indraprastha Gas Ltd, Mahanagar Gas Ltd and Gujarat Gas Ltd were not responded to.

“In places like Delhi, marketing exclusivity has already ended, but it (gas distribution) has not yet been opened up, and previous attempts to open up the sector have been legally challenged. The regulator will have to balance the regulation as it would be difficult to ask new players to focus on regions with less demand,” said Prashant Vashisht, senior vice president and joint group head, corporate ratings, Icra Ltd.

Under the PNGRB Act, 2006, the regulator authorizes companies to develop municipal gas distribution (CGD) networks in specific areas of the country. CNG is mainly used as an auto fuel while PNG is used in the domestic, commercial and industrial segments. The new rules would come into effect as soon as PNGRB issues a notification in this regard.

The development comes at a time when the government is looking to increase the share of gas in India’s energy mix to 15% by 2030 from the current 6%. To date, CGD networks have been authorized for 300 markets, covering approximately 88% of the country’s area and 98% of its population. Last month, the Union government floated the 12th round of tenders to offer seven geographical areas in five northeastern states and the Union territories of Jammu & Kashmir and Ladakh. The closing date for submission of tenders is 11 January 2024 and the regulator intends to finalize the award by March. Once the tenders are complete, 92 cities will be covered by CGD operators.

Meanwhile, in order to support the adoption of CGD in the country, the Union cabinet approved new guidelines for natural gas pricing following the recommendations of the Kirit Parikh-led committee, which paved the way for the domestic natural gas prices of linking India to global crude prices.

After the change, the price of natural gas is calculated at 10% of the monthly average of the Indian crude oil basket, which is a weighted average of Dubai and Oman (crude) and Brent (sweet) crude oil prices.

Under the new system, a floor price as well as a ceiling price was introduced for operators to obtain gas from oil and gas companies. Effectively, this would protect CGD and CNG operators from international price volatility. For the record, the cap and ceiling are, respectively, $4 per million British metric thermal units (mmBtu) and $6.50 per mmBtu under the Administered Price Mechanism.

According to an Icra report released in September, the implementation of the Kirit Parikh committee’s recommendations in April helped gas operators improve their cost economics, resulting in lower domestic gas prices.

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Updated: 20 November 2023, 12:07 AM IST

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