Petroleum board to decide on GAIL split

GAIL has already started accounting for transporting revenues separately.

The government has given public sector GAIL (India) Ltd a reprieve. The company may not have to be split into transportation and marketing companies. The decision has been left to the proposed Petroleum & Natural Gas Regulatory Board (PNGRB).

Officials told Business Standard, the final draft of the gas pipeline policy and also the Bill for setting up of the regulator did not specifically provide for the unbundling but had a provision for prescribing an affiliate code of conduct in order to ensure that the potential users were able to access gas transportation services on a non-discriminatory basis.

Unbundling is the process of dividing natural gas services and supply into components with each component priced separately to prevent cross subsidy.

GAIL is a dominant player in the gas business with 1,150 km pipeline network transmitting 72.86 million standard cubic metre per day.

The earlier drafts of pipeline policy had laid down that companies wanting to lay natural gas pipelines will need to unbundle into production, transportation and marketing companies as a prelude to developing a mature gas market.

This was done due to criticism from British Gas, Reliance, Exxon Mobil and Gujarat Gas since they feared a monopoly of GAIL.

"To promote an open access environment, it is important to ensure that a transporter who is also selling a commodity does not move his products at a priority," said a senior executive of a private player.

As a prelude to the unbundling process, GAIL has already started accounting for transporting revenues separately and is in the process of appointing consultants to look at the issue of unbundling, said officials.

"The regulator can decide on the unbundling based on objections from the other players," said an official.

The five-member regulatory board would also be entitled to levy penalties on the players in case of violation of guidelines set by it.

The PNGRB Bill has been approved by a group of ministers headed by Defence Minister Pranab Mukherjee and is expected to be put up before the Cabinet for approval.

The petroleum ministry wants the Bill to be introduced in the winter session so that the grey areas in the downstream petroleum and gas business are addressed by the regulator.

The PNGRB would look into the price of natural gas in the context of provisions relating to restrictive trade practices and transportation charges for use of pipelines in line with the existing provision in the Electricity Act 2003.