Dissension is growing in the Petroleum & Natural Gas Regulatory Board where members are opposing the chairman on several amendments.
For a regulator that is just a year old, the Petroleum and Natural Gas Regulatory Board (PNGRB) has set a commendable record. It has put together around 14 regulations since October 1, 2007, when it came into being, and established a reputation for efficiency that puts other regulatory bodies in the shade. However, it has also displayed a penchant for amending some of its regulations rather hastily — and without seeking a consensus on the changes.
The PNGRB is small. Apart from the chairman Lavanyendu Mansingh, there are just four other members who are responsible for one of these functions each: infrastructure, commercial, distribution and legal. Yet, this regulatory body has found itself riven by dissension, primarily because members feel that the principle of collective decision-making is being violated.
Dissent notes have been flying thick and fast between the chairman and members, and with the fissures out in the open, queries are surfacing in different forums on how the board arrived at several key decisions. One such is the Appellate Tribunal which sought this information recently while hearing a petition by a company whose application for CGD networks had been rejected by the board. Earlier, the then petroleum secretary publicly rebuked the board for its style of functioning after some members complained of being sidelined. At the inauguration of its new office in the swanky World Trade Centre in Delhi in July, the secretary had told the board to function collectively.
That clearly is not happening. Instead, the rifts are widening over some crucial issues, prime among them being the decision to delegate all powers for grant of authorisation to lay, build, operate or expand city or local natural gas distribution networks to the chairman. This is the most critical function of the board and members are extremely unhappy about this abrogation of their responsibilities, more so because the chairman has decided to reduce fellow members to “a committee of two or more members” to decide on those cases which he thinks fit to refer to them. These cases would pertain only to rejection of authorisation, it is learned.
Two of the affronted members have pointed out that it was not a tenable decision because according to well established maxims of law ‘a delegated authority’ (board member) cannot be re-delegated. “This principle has been applied in a catena of cases in the Supreme Court,” says a note by the member (legal). To add insult to injury, the decisions of the committee of members are not binding on the chairman! The decision on delegation of power, interestingly, was pushed through at a September meeting when the dissenting members were absent.
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These developments have caused a flutter in industry circles since the PNGRB has just kicked off the process for authorisation by calling for bids to set up city gas distribution networks in six cities. This follows the expression of interest (EoI) received from entities for 70 cities in June this year. Sixty of these EoIs have come from Reliance Industries’ Reliance Gas Corporation and seven from Gail Gas, a subsidiary of the public sector Gail India. No one wants an individual to decide the outcome.
Asked to explain why the power of authorisation had been delegated to him when other regulatory bodies act in concert, Mansingh says there were “no hard and fast rules on this issue”. Besides, the process of evaluating the bids — the first tranche is for Kakinada, Sonipat, Mathura, Meerut, Kota and Dewas — is a totally no-discretionary process and “even the chairman cannot change the outcome of the bids,” he says. That, however, does not address the question of why the powers of authorisation along with many others have been taken away from fellow-members.
Interestingly, the bids for the six cities were invited without reference to the board, and this has become a sore point with some members who have been pointing out that without notification of Section 16 of the PNGRB Act, the board is in no position to issue authorisations. Members fear there could legal challenges if the board accepts a bid without the protection of Section 16.
Equally controversial is the proposal to amend the regulation on tariff zones relating to natural gas pipelines. Under this regulation, the fees that new entities have to pay for using existing pipelines is fixed zone-wise, depending on the point at which the spur or a new pipeline joins it. The tariff zones were notified on May 6 after a wide-ranging public consultation process. Yet, the board intends to change the zone tariff in such way that only new entities will benefit.
This has become a festering issue in the PNGRB where members have pointed that there was no ground for changing the regulation which was finalised after a comprehensive examination of the issue and after consultations with the stakeholders. Warning against the ‘undue haste’ in pushing through the amendment, members say that it is only after a regulation comes into play that issues requiring an amendment could be expected to emerge.
Worse, as one member points out, the proposed amendment would hurt consumers for the simple reason that consumers in the same zone along the same pipeline would end up paying different tariffs based on the source of their supply. That’s because upstream gas prices are not within the purview of the board. In fact, two members have insisted that their dissent should be recorded if the chairman decides to go ahead with the amendment unilaterally.
Outside the board, too, there are misgivings over the proposed amendment. Gas industry analysts say that given the shortfall in pipeline networks in the country, the board ought to be putting in place regulations that attract investments in pipeline infrastructure instead of adding to the uncertainty of revenues of transporters as the proposed amendment would.
Simmering resentment over the functioning of the board is threatening to spill over on other issues also. One of the festering issues is the lack of detailed minutes of the board meetings. Dissent notes are not made part of the proceedings and many of the decisions, it is alleged, are taken at informal meetings.
It is curious, too, that the chairman is taking recourse to an unusual method of maintaining official files. A note circulated to the members says that as the process for grant of authorisation has been initiated with the bids for six cities, it is “expected that a large number of appeals may be filed with the Appellate Tribunal against the orders of the Board”. Since the tribunal may call for relevant records, PNGRB has decided to maintain two sets of files for each application: a main file, which would be with the user department, and a ‘case file’ that will contain a record of all actions, hearings and orders passed on the issue. It is the latter which will be submitted to the Tribunal when required. The PNGRB has been effectively reduced to a one-man show without the usual checks and balances that govern other regulatory bodies. The big question is why this has been allowed to happen.