A regulator should not have any relationship with the ministry. If you want the regulator to have a cosy relationship with the ministry, then why have an independent regulator?
Natural gas may have become the main stay of hydrocarbon production in India, but the Petroleum and Natural Gas Regulatory Board (PNGRB), the body appointed to regulate the gas and petroleum downstream business, can’t function any more with the Delhi High Court striking down its power to issue licences.
In a free-wheeling chat with Ajay Modi & Jyoti Mukul, chairman Labyendu Mansingh says a regulator has to function independent of the government. Excerpts:
Ministry officials say Section 16 was not notified because there were some non-serious players who wanted to take an advantage and this they want to rectify in the Act through an amendment. What do you have to say?
We had no role in drafting the legislation (PNGRB Act). We had no role in our selection. We are here after getting constituted under an Act of Parliament. We will fulfill whatever mandate is given to us under it. After the board was constituted, at its own discretion, the ministry did not notify Section 16. It is not because we wanted them not to notify. Officially, we do not know the reason behind this.
It was the board that pointed out in the beginning that Section 16 was not notified and that there may be some questions raised about the powers of the board. The ministry replied to us saying they have got the notification vetted by the Law Ministry and after that throughout through their statements, public actions, replies in the Parliament and on other occasions, the ministry indicated that board had powers. It took a contrary stand only in the court.
On the other hand, the minister and the ministry kept on asking us to expedite the rollout of city gas distribution and that is what we were doing. We have gone to the SC because we think that the judgment is challengeable on valid grounds.
As far as Section 16 is concerned, the IGL (Indraprastha Gas Ltd) case actually hits at the very basis of a transparent and objective regulatory system. The only exception to the powers of board for grant of authorisation for CGD network are those entities which were approved by the Centre prior to October 1, 2007.
Under one regulation, players who were granted authorisation prior to the date just need an acceptance of the Central Government authorisation by the board. Those who did not have authorisation need to apply under regulation 18. Before the Act, there was no statutory requirement for anyone to undertake the CGD business. We are bound by the Act. The Act nowhere provides that anything that was happening before without the approval of the ministry is illegal and should not be authorised. After the board came into existence, the Centre has no role in authorisation.
So far as the issue of non-serious players is concerned, we have rejected three applications under regulation 18 — one by IGL for Ghaziabad and the other two by a private entity. Under regulation 18, we are required to grant authorisation to a player who has shown minimum 25 per cent physical and financial progress. We have stopped taking cases under regulation 18 after the deadline specified in the regulations.
Was it because the regulator had issues with government-promoted companies that you ran into problems with the ministry?
The basic objective of the regulator is to provide a level-playing field. We can’t distinguish between a private sector player and a public sector. A regulator should not frame regulations and should not decide after looking at who is applying. We are from the beginning committed to total transparency and objectivity, and our attempt has been that there should be zero discretion at any level. A regulator should not have any relationship with the ministry. If you want the regulator to have a cosy relationship with the ministry, then why have an independent regulator?
Ever since the board came into being, we kept on asking for the list of entities which were authorised by the ministry. With five reminders, no list came. When the draft regulations were framed, no comment came from the ministry. Subsequently, the regulations were notified and placed before the Parliament. Can it be under a ministry’s discretion as to which Act of Parliament should come into force by not notifying a single section?
Regulatory bodies have improved the regulatory framework and have played a role in accelerating the reforms process and economic growth. If a regulatory body is not independent, it is redundant. Why have a separate body if it ends up as an office attached to the ministry? It is up to the regulatory body to function independently.
As the chairman of the first regulatory body in the petroleum sector, I carry a far more onerous burden than what my successors would carry. I should ensure that the board develops itself as a fine professional, independent regulatory body.
The ministry is proposing to set up a gas highway authority after which the board will not issue authorisation for pipelines. Do you think there is a need for a separate body?
Except Pakistan and India, all other countries have only one energy regulator. In India, we have a power regulator and a petroleum regulator. A major justification, which is being given by the ministry, is the regulations of the board are cumbersome and takes lot of time. They say regulator has not done much to expand the pipeline infrastructure and lots of areas under the country have been left out of natural gas. So, there was a need for separate entity. The factual position is that in a short period of two years and in spite of all the roadblocks put in our way, we have already identified four major pipelines and are calling for bids for grant of authorisation. They are proposing a gas authority, a standard setting authority, leading to proliferation of regulators within the sector.
The ministry wants to take away your powers to entertain cases related to government policy? What do you have to say to that?
According to the Act, the board functions as a regulator and a quasi-judicial authority. Three private companies filed a complaint, as per our regulations, alleging that the OMCs, by deliberately fixing price below the cost, were causing unfair trade practice. Merely because it was a complaint against public sector, we can’t refuse to entertain it. Notices were issued to the OMCs. However, OMCs said the board has no jurisdiction because under Section 11 (a) petrol and diesel had not been notified. OMCs went to HC, which asked the board to pass an order. The board said that it has powers. Again, they went to the Electricity Appellant tribunal which upheld board’s power to entertain the case. The tribunal also asked us to send a notice to the government.
When the regulator was conceived, it was for the downstream sector. Now, with the HC judgment, you can’t issue authorisation for city gas, while the ministry is looking to take away your powers on trunk pipelines. For petroleum products also, you are not allowed to regulate since their pricing is a government policy. What is left for you to regulate?
It is not for us to decide. It is for the government and the nation to decide. You have to come to a conclusion whether you need an independent regulatory body or not. If you come to a conclusion that the regulator should be there, but it should be bound by the government’s policy, then why have a regulator.
If there is no need, the Act can be repealed. I am not aware of any Act that can be subject to discretionary executive decision making. A policy decision of the government can’t override an Act of Parliament just as an Act cannot override a provision of the constitution. I have no vested interest in this body being continued.
After this HC judgment and pending the SC decision, what will be the state of CGD network? There is a legal view that in the meanwhile government should oversee this.
I do not agree with this since there is an Act of Parliament which has provided for grant of authorisation. The HC has only questioned our power to grant authorisation and that is why we have gone to SC. Now we should be told what we are supposed to do. Every single regulatory body in the country has gone through a tumultuous process. We probably have been luckier.
