The Planning Commission has objected to the draft gas pipeline policy which calls for exclusivity for laying, building, operating, expanding city or local gas distribution networks and giving exclusivity of marketing to the entity developing such networks. The period of such exclusivity is left open.
The commission has objected to the Petroleum Ministry not making the necessary changes in the draft policy despite its repeated suggestions. No valid arguments had been given for not making critical changes, it added.
“Any form of exclusivity is opposed to the basic objectives of the Petroleum and Natural Gas Regulatory Board Act and promotes inefficiency and monopolies by eliminating competition. It is a worldwide practice to obtain bids to create pipeline infrastructure from competing parties and paying them regulated charges.
The Plan panel suggested that network owners should provide open access to competing suppliers and a choice of suppliers to consumers. The regulatory act does not provide for regulating either the upstream or the downstream prices of gas and/or petroleum products.
“Exclusivity would lead to monopolistic exploitation as is evident in the case of Mahanagar Gas and Indraprastha Gas. For example, in 2005-06 and 2004-05 post-tax profits of Mahanagar Gas were 1.5 times and 1.2 times the paid-in equity of the company respectively,” the commission added.
{{/usCountry}}“Exclusivity would lead to monopolistic exploitation as is evident in the case of Mahanagar Gas and Indraprastha Gas. For example, in 2005-06 and 2004-05 post-tax profits of Mahanagar Gas were 1.5 times and 1.2 times the paid-in equity of the company respectively,” the commission added.
{{/usCountry}}On the suggestion of unbundling of operations and an arms-length relationship between marketing, transportation and distribution functions, the Planning Commission said the principle was well stated but no time-table had been established for such unbundling.
“We have been talking of unbundling GAIL for over five years without any success. Further, the concept of exclusivity for marketing to those entities establishing the city gas distribution (CGD) network goes against the concept of unbundling and separating content from carriage,” it said.
The panel added that if the entity establishing CGD network had a monopoly on marketing gas, then the exercise of the regulator determining the tariff for the distribution network during the exclusivity period would be meaningless without the authority to regulate the price at which the exclusive monopoly can sell gas to various consumers connected to the network.