GAIL, which has direct or indirect control of many single-city distributors could now face new competition.

Govt may bring in new rules to phase-out gas distributors monopoly in 34 cities
Money Gas Wednesday, July 17, 2019 - 09:37

Consumers of piped gas distributed in different cities across the country may get to choose their supplier in the near future if the government has its way. There is a move to bring to an end to the monopoly being enjoyed by a handful of gas distribution companies. There are 34 cities in all where piped gas is being supplied to both domestic consumers as well as industrial users and automobile filling stations. Some cities like New Delhi and Mumbai have Indraprastha Gas Ltd and Mahanagar Gas Ltd, which have the mandate to supply only in single cities. There are other players who have more than one city to cater to.

If this change is pushed through, it would bring the existing arrangement to a premature end. The exclusive rights to these distributors were issued to them by the Petroleum and Natural Gas Regulatory Board (PNGRB) for 25 years in only 2009. The concept was that these companies would bear the cost of setting up the infrastructure and will have to recover the same. The government now estimates that the gas distribution companies have not only recovered their initial costs but have made more money in terms of profits. Hence this decision to introduce competition in the field.

The statement on this change in the policy has come directly from the PNGRB, through one of its members who handles the relevant functions within the board. He has indicated that the groundwork may take up to six months and by then there will be additional players in all these cities offering gas supply through the piped route. Wherever the new companies utilize the existing pipe network of the current distributors, they will pay a user fee for the same. The way it is being projected is that the changes in the rules will be brought about in about three months and another 3 months consumed in implementing them.

Some companies like Gail (India) Ltd could be directly impacted by this new arrangement since they have been enjoying the monopoly status and now will have to gear up to face competition. One company that has 11 cities where it supplies gas is Gujarat Gas Ltd. Its monopoly services cover cities like Ahmedabad, Jamnagar, Surat and Rajkot, among others. Companies like Indian Oil and Adani Gas too hold distribution rights.

The other objective behind PNGRB suggesting this change is the hope that the 130 odd companies now chosen for award of city gas projects would bring in fresh investments in the sector of Rs 1.2 trillion ($17.50 billion). Some of the current players will also be included in this list besides new ones. An additional 22.1 million households will be brought into the piped gas grid and the 4,600 more fuel stations will have to be built to match the increase in the infrastructure.

All these will dovetail into the broad objective of lifting the share of natural gas in India’s energy mix to 15% from the current level of 6.2%. The government wants to have 10 million households receiving piped gas supply by next year. That would mean doubling the capacity from the 5 million who enjoy the facility now. The current move can bring in fresh foreign investment as well.   

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