Regulator finalises norms for city gas projects

Paving the way for projected investments of over $39 billion, the Petroleum and Natural Gas Regulatory Board (PNGRB) today notified the regulations for distribution of gas to households, vehicles and industries in cities.

The companies would get contracts to distribute gas in cities through competitive bidding, the board said.

The projects would be awarded on the basis of network tariff, gas compression charges, the length of the pipeline proposed and the number of households to be covered.

PNGRB Chairman L Mansingh had earlier said that more that 100 domestic and foreign companies had shown interest in setting up networks in over 250 cities.

The regulations give a five-year marketing exclusivity to the company winning the right to set up a gas distribution network to a city.

After the period is over, other companies will be allowed to market gas by using the existing network for a fee, according to the guidelines. The original company would have a lifetime exclusivity of 25 years for the network.

Companies such as Indraprastha Gas in Delhi and Mahanagar Gas in Mumbai that already operate gas distribution projects will have to re-apply for authorisation.

Also, the marketing exclusivity for these existing companies would be only three years.

An industry executive said the regulations did not consider the end-user price and would favour the companies, which had their own source of gas. "They will be able to bid very low tariffs," said the official.

PNGRB member BS Negi said since prices of gas were not under the regulator's purview, the board could not make consumer prices a condition for bidding. "We are opening up the gas market and creating competition," he said.

However, a marketing exclusivity of five years deprive consumers of choice, said industry players.

Companies interested in bidding for rights to set up a city gas distribution network would need to have an assured source of gas. They should also have laid over 300 km of oil or gas pipelines or have a joint venture with a company with such an experience.

The companies would also need to have at least one year's experience in maintaining a city gas network or form a joint venture with a company with such an experience, the PNGRB said.