City gas firms lock horns with regulator

'Unauthorised' laying of new pipelines cannot be allowed, says gas regulator.

The Petroleum and Natural Gas Regulatory Board (PNGRB) seems to be heading for a collision with the gas distribution companies that it is supposed to regulate.

According to the gas regulator, no company can build or expand a gas distribution network without the permission of the PNGRB. However, leading gas distribtion companies are laying new pipelines every day without its permission.

"Permissions are not needed for each locality separately. We have the permission to operate in Delhi and the city is one geographical area," said Om Narayan, managing director of Indraprastha Gas Ltd (IGL), which retails gas to households and vehicles in Delhi.

The regulator, in October last year, had pulled up IGL for expanding its pipeline network to the city's Vasant Vihar area without seeking its permission. The company, however, continues to expand, with it now laying pipelines in Vasant Kunj.

A host of other companies already in the business are also expanding their network "in order to meet consumer demand".

Maharashtra Natural Gas Ltd, for instance, which distributes gas in Pune, is also on an expansion spree, without an express "permission" from the regulator.

"The ruling does not apply to us," says TK Majumder, managing director of the company. All of these companies started operations before the regulator formally came into being on October 1, 2007. Their city of operation was chosen for them by the petroleum ministry after directions came from the Supreme Court.

The regulator is planning strict action against these companies. "We have issued notices to all of these companies. Strict action will be taken against these companies which are expanding their network without our permission," said a member of the regulatory board.

According to the regulator, existing city gas distributors will have to reapply to the regulator for "authorisation" to operate and expand in their cities. The deadline for reapplying is March 31.

"It appears that almost all entities which are in business are without authorisation," said PNGRB chairman, L Mansingh.

The companies say they are expanding despite the regulator's directive as the demand for gas in cities is continuously growing. "Even the state government officials keep urging to speed up our expansion," said SP Selvam, managing director of Central UP Gas Ltd, which distributes gas in cities such as Kanpur and Bareilli, and is planning to spread to Allahabad and Varanasi.

"We cannot wait for permission," IGL's Narayan said.

THE MISSING SECTION 16
The crux of the problem lies in interpretation of the powers of the regulatory board, which was notified on October 1, 2007, after the Petroleum and Natural Gas Regulatory Board Act was passed in Parliament in 2006.

The government, however, has not yet notified Section 16 of the Act, which deals with companies which already have city gas distribution operations.

"Since Section 16 is not notified, the regulator has no way to deal with existing companies," the chief of another existing city gas distribution company said.

A regulatory board member however reads the issue differently. "In the absence of the Section, there is no directive on the working of the existing companies. So, all incremental works by the companies will need approvals," the official said.

Some companies are keen to eschew a fight with the regulator. A Vishwanadha Sarma, managing director of Bhayanagar Gas Ltd, which distributes gas in Vijaywada and Hyderabad, is one of them.

"We are not expanding at all till there are directives from the regulator, which are likely to come once the final city gas regulations are notified (by mid-March 2008)," he said.

"It is no point locking horns with the regulator."