Monopoly for CNG operators

Panel for exclusive marketing rights to gas distributors through a "competitive process".

The distribution of compressed natural gas for automobiles and piped natural gas for households and commercial establishments like hotels in cities can soon become a monopoly business.

A committee of secretaries, which cleared the Bill to set up a Petroleum and Gas Regulatory Board (PGRB), has proposed that all gas distributors be given exclusive marketing rights in the cities they operate after being selected through a "competitive process". It will be left to the PGRB to decide the process.

The Bill will now be placed before a group of ministers set up to look into the matter. After this, it will be put up before the Cabinet. Petroleum ministry officials said the Bill would not be ready for introduction during the monsoon session of Parliament starting tomorrow.

Sources close to the development said the idea behind the proposal was to make the business viable, given the large investments companies needed to make in setting up a city gas network.

Oil industry observers said if accepted, the proposal could generate a huge interest in the business.

At present, companies nominated by the Centre are in the city gas business. Thus, Indraprastha Gas Ltd (a joint venture of Gail India Ltd, Bharat Petroleum Corporation Ltd and the Delhi government) operates in Delhi, Mahanagar Gas (a British Gas, Gail India Ltd and Maharashtra government joint venture) operates in Mumbai and Gujarat Gas (a subsidiary of British gas) runs the business in some cities of Gujarat. Joint ventures for Kanpur, Agra and some other cities are expected to be operational soon.

Although these companies face no competition in their respective areas of operation at present, the current guidelines are silent on the possibility of more operators being appointed in these cities.

Observers were quick to point out the profits reported by Indraprastha Gas Ltd owing to its city gas monopoly in Delhi "" the company reported a net profit of Rs 92.68 crore on a turnover of Rs 450 crore in 2004-05.

Petroleum ministry officials told Business Standard that the regulator would be empowered to look into the "reasonableness" of prices fixed by oil companies, though it would not directly set retail prices.

However, issues of disputes between companies relating to the refinery gate price or the retail price charged to consumers will be decided by the regulator.

The modified Bill will also include the definition of profiteering as described in the Companies Act and will incorporate provisions on contract carriers.

The regulatory board will also market service obligations for the operating companies but officials said the CoS was of the view that the provisions should be different for petroleum products and natural gas.

This is because natural gas lacked demand in the backward areas, they added. The regulator will set guidelines for pipelines, whether for crude, petroleum products, or natural gas.

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SWEETENER IN THE DEAL

ALL GAS distributors may get exclusive marketing rights in the cities they operate

BILL to be placed before a group of ministers

REGULATOR to only look into the "reasonableness" of prices fixed by oil companies, not to set retail prices directly