The downstream oil industry regulator, Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted under The Petroleum and Natural Gas Regulatory Board Act, 2006 with an aim to protect interests of consumers and entities engaged in activities related to petroleum, petroleum products and natural gas.
InfralineEnergy''s Sangeeta Tanwar engages Labanyendu Mansingh, Chairman, PNGRB in a conversation to find out the roadmap ahead for PNGRB following the Supreme Court's judgment, directing all pending and new city gas distribution (CGD) applications to be dealt by the Regulatory Board. He also shares his views on apparent disconnect between the Regulatory Board and MoPNG (Ministry of Petroleum and Natural Gas) over rolling out CGD in more GAs and the possibility of petroleum prices coming under the Regulator'’s domain.
Mansingh reiterates the Regulatory Body''s commitment to ensure competitive market for the growth of CGD and its on-going efforts for promoting a National Grid making gas available from any given part of the country to another.
What are the ways in which India can move towards a gas based economy?
We have to promote and establish a competitive gas market in India regulated in accordance with the provisions of the PNGRB Act, 2006. For this purpose, all bottlenecks in the way of operation of market forces have to be phased out. Once this is achieved, given the obvious advantages of natural gas in terms of price, convenience and environment friendliness, availability to meet increasing demand would certainly improve leading to a gas based economy.
The gas sector in India was exposed to competition when gas' share in the energy basket was only eight percent which has now increased to 10 percent. Do you think deregulating the gas sector at a time when the market was not mature has proved to be a misstep?
The gas sector has still not been deregulated. The bulk of the gas in the domestic market is subject to the allocation policy and price determination by the Government. A competitive market cannot develop and mature unless all market distorting factors are removed.
MoP&NG had set a target of covering 200 GAs by 2015. However, PNGRB has initiated a fresh feasibility study to identify 300 GAs. What will be the impact of these two contradictory views on the growth of CGD?
After the constitution of PNGRB as the independent statutory regulator under the provisions of the PNGRB Act, 2006 effective from October 1, 2007, only the Board can authorise city or local area distribution networks. This is also linked to the development and expansion of the pipeline infrastructure for transmission of natural gas which also is under the purview of the Board.
"In order to minimise the incidents of transmission tariff on the ultimate consumer of gas, the Board has decided to actively encourage swapping of gas."
MOP&NG have not intimated the Board about any target for covering 200 GAs by 2015. In case this is conveyed to the Board it would certainly take this into consideration while finalizing the list of GAs for roll out of CGD networks through grant of authorization by covering six to eight GAs per bidding round. It is relevant to mention here that the Board gives priority to GA for such coverage on the basis of likely availability of natural gas through pipelines. The list of GAs per bidding round is also finalised after consultation with the concerned State Governments for determining the boundaries of the GA selected, charge area.
There is a view in the industry that calls for free market forces to operate for gas consumption and gas pricing, covering both domestic production as well as import of gas. What are your views on existing formula based pricing of gas paving way for a free market?
As far as the Board is concerned, it is bound to comply with the mandate flowing from the provisions of the PNGRB Act, 2006. Section 11(a) of the Act stipulates that the Board shall foster fair trade and competition amongst the entities for the protection of consumers' interest. As such, the Board is bound to ensure a competitive market for natural gas regulated in accordance with the provisions of the Act and the regulations made there under.
What are PNGRB's arguments against price pooling of natural gas? What are the alternatives to address the issue?
In view of the specific provision of Section 11(a) quoted above, the Board does not have the flexibility to allow any practice which does not confirm to fair trade and competition in the market.
There is a great mismatch between availability of gas and the pipeline infrastructure across the country. Why do we have such huge disparities in our pipeline network - do we see things changing with expansion of pipeline network in the country?
The Board is pro-actively promoting a National Gas Grid to ensure that gas from any source is delivered to any other place in the country. It has already bid out the following five pipelines for the first three of which the bidding process is over. These pipelines traverse through the areas which are under developed.
Mallavaram - Bhilwara
Bhatinda - Jammu - Srinagar
Surat - Paradip
Durgapur - Kolkata
As a result of the initiative of the Board, the pipeline infrastructure is expected to more than double from the present 11,000 km to 25,000 km in the next five years.
The Zonal Tariff appears to be in contradiction with the idea of an integrated national gas grid due to cascading effect of distance based tariff/s. What are the Regulatory Board's concern and suggestions for rationalising gas pipeline transportation tariff?
There is no contradiction between the Zonal Telescopic Transportation Tariff System put in place by the Board with the idea of an integrated National Gas Grid. Since the investment on each transportation pipeline has to be assured of a minimum return in order to facilitate the flow of massive investment required for the expansion of the gas distribution infrastructure in the country, the tariff is required to be determined for all existing or under implementation pipelines prior to the appointed date separately as per the relevant tariff determination regulations.
"The Board would like to pro-actively facilitate swapping not only for minimising transmission tariff but also for optimising transmission capacity."
However, in order to minimise the incidents of transmission tariff on the ultimate consumer of gas, the Board has decided to actively encourage swapping of gas. In accepting EOIs for pipelines for grant of authorization through the bidding process, the Board tries to bring about a degree of competition between the pipelines so that the consumers benefit from the competition.
Players like GAIL and RGTIL have excess gas transmission capacity and they are seeking greater idle time for their pipelines (from five days to 15-30 days) as against lower rates and duration advocated by shippers. What is the way forward to ensure maximum utilisation of gas pipeline capacity?
The issue has been addressed in the Access Code notified by PNGRB. All transporters are bound to comply with the provisions of the Access Code.
We do not have an open policy framework to facilitate swapping of gas between customers and networks for effective management of Demand and Supply. What is PNGRB's stand on the issue?
As mentioned earlier, the Board would like to pro-actively facilitate swapping not only for minimising transmission tariff but also for optimising transmission capacity. For this purpose, it is in the process of providing incentive to both the transporters as well as the shippers in order that more and more swapping takes place. However, a major constraint in this regard is the issue of State-level taxation which is deterring the parties from going in for swapping. The answer to this would be the coverage of natural gas under the goods and services tax for which the Board has taken up the matter with the Empowered Committee of State Finance Ministers.
What are the reasons for small number of players in CGD business?
The reason for the limited number of players in the CGD market is the monopoly of the Central Public Sector Undertakings which were allowed to develop networks prior to the constitution of the Board on a nomination basis. It is relevant to mention here that 10 entities promoted by GAIL along with the three OMCs were granted Central Government authorisation for 23 GAs without going through the bidding process immediately prior to the constitution of the Board. This is not in-conformity with the Policy for Development of Natural Gas Pipeline and City or Local Natural Gas Distribution Networks of MOP&NG notified on December 20, 2006.
As far as the Board is concerned, the Board has tried to ensure maximum competition at the bidding stage so that the benefit of competition flows to the consumers. Apart from deliberately calibrating the criteria for eligibility for participating in the bidding process to ensure this, the Board along with the CII organised a series of workshops at major locations across the country to create awareness about the regulatory requirements and opportunities emerging as a result of the initiative taken by the Board. These efforts are reflected in the results achieved so far. In the third round of bidding, 51 bids have been received for seven GAs with most of the bidders being new comers to this sector. The Board is quite optimistic that as a result of its efforts, this trend would continue benefiting the consumers.
What is the objective and purpose behind Integrity Management System? What are the advantages that it offers to the industry?
It is presumed that the reference is to the integrity of the transmission grid. As mentioned earlier, the Board is pro-actively pursuing the establishment of a National Gas Grid which would necessarily consist of a number of pipelines operated by different transporters linked to each other.
"As far as the multi level filling stations are concerned, the Board is in the process of identifying bottlenecks leading to long queues being formed at particular hours at certain CNG ROs."
In order to ensure smooth technical coordination as well as seamless transmission of gas from any source in the country to any consumer, the Board has to ensure that the integrity of the grid is ensured through regulatory over-view ensuring standardized technical and commercial operation. This would be integral to a competitive gas market in the country.
What is the progress on PNGRB's proposed initiative alongwith PESO (Petroleum and Explosives Safety Organisation) to convert existing ROs to multilevel filling stations?
The Board is not aware of any initiative taken by PESO. Incidentally, only the Board is statutorily empowered under Section 11(f) of the Act to lay down regulations the technical standards and specifications including safety standards in all activities, including the construction phase, in the petroleum and natural gas sector. The Board is in the process of laying down such standards and safety norms covering specific activities in the sector in conformity with its priorities.
As far as the multi level filling stations are concerned, the Board is in the process of identifying bottlenecks leading to long queues being formed at particular hours at certain CNG ROs. Since it is well nigh impossible to obtain land in urban areas to set up adequate number of ROs, we have to rely on available technology, without in any way compromising with the safety requirements, to cut down on waiting periods for filling CNG.
The Regulatory Board was under suspended animation prior to the Supreme Court ruling on PNGRB's powers to authorise CGD projects. How do you see the judgment impacting the development of CGD business in the country?
The Supreme Court vide its order dated May 12, 2011 has directed that all pending and new applications, in addition to all new applications to be filed in future - to be dealt with by the Board.
(InfralineEnergy thanks Labanyendu Mansingh, Chairman, PNGRB for sharing his valuable insights with our readers. The column 'In Conversation', is a platform to engage experts from various sectors to share their views on the different transformations happening in the Indian energy sector.)