Analysis: India's gas pipeline policy

NEW DELHI, Dec. 29 (UPI) -- India has announced a gas pipeline and city gas-distribution policy inviting private participation and allowing companies to have a time-bound monopoly to sell natural gas to households and vehicles.

"City gas distribution projects will have marketing exclusivity. A company or consortia granted City Gas Distribution licence for a particular city will have marketing exclusivity for a certain number of years," said Petroleum Secretary M.S. Srinivasan.

He said the pipeline policy provides for operators to build a minimum of 33 percent extra capacity for leasing to third parties on common carrier principle basis.

The period of exclusivity will depend on the size of the city and population. It also depends on the investment made by the companies in CGD projects and would be determined by the regulator that would be put in place by late January, 2007.

"It may vary between three and five years," Srinivasan said.

The policy announced early this week is aimed at facilitating open access for all players to the pipeline network on a non-discriminatory basis and promoting competition among entities. This, it is hoped, would help avoid abuse of the dominant position by any entity.

The main thrust of the policy is to secure consumer interest, both in terms of gas availability and reasonable tariff. Under the provision of the much-awaited policy, the Petroleum and Natural Gas Regulatory Board, which will be in place within one month, would authorise the laying of pipelines and setting up of CGD networks.

The federal government, according to the policy, would consider the right of user acquisition for any transmission pipeline/city or local gas distribution project after the regulatory board had granted authorisation.

"Any entity desirous of applying to building, operating or expanding common or contract carrier gas pipelines will have to unbundled its transportation and marketing business," said Murli Deora, the petroleum and natural gas minister.

The gas companies, which would be authorized by the regulator, may not have business interests in gas marketing or city or local gas-distribution networks in the long run with the maturing of gas markets.

Domestic private gas major Reliance Industries had demanded that the government throw open the CGD projects to all.

None other supported it than the government's planning panel whereas government-owned gas and oil companies and global energy majors British Gas and British Petroleum demanded exclusivity.

India's Petroleum Ministry has been saying that a gas pipeline policy will be announced shortly, which may lay the groundwork for setting up the national gas pipeline grid.

The energy major has set 2008 as the target for establishing a national gas grid. By the same time, Reliance Industries Kaveri Godavari Basin gas would also become available.

"The gas grid will help in the transportation of gas produced in the country and what is being imported in the form of liquefied natural gas. The infrastructure will also help provide more gas to cities to enable them to switch over to compressed natural gas for transport sector and reduce air pollution," said Sukumar Shah, an energy expert at the Federation of Indian Chambers of Commerce.

The gas pipeline and distribution network policy has been attacked by the Planning Commission, which accused the government of failing to make necessary changes as proposed by the commission and leaving it with loopholes.

The planning panel is at loggerheads with the Petroleum and Natural Gas Ministry for ignoring panel's suggestions.

"Compared with similar policies worldwide, the policy document leaves many areas unanswered. The very purpose of the pipeline policy remains unclear as it fails to clarify the provisions contained in the petroleum and natural gas board act," the panel said.

It said that besides taking away the independence of the regulator, the policy overlooked storage, which is an integral part of any transportation and distribution network.

The policy is silent on several aspects, including transnational pipelines under India's agreements with foreign countries.

The energy expert committee of the Planning Commission asked the petroleum minister to invite comments before making public the final draft of the policy.

The minister instead decided to go ahead with the announcement of the policy without taking the advice of the commission, which played a vital role in drafting the policy.

In fact, this attitude of the minister irked the panel and the its officials decided to air their grievances in public.

"Despite several meetings to invite comments, the petroleum ministry has stopped well short of making necessary changes to the policy document. More importantly, no valid arguments are given for not making critical changes recommended by the planning commission," the commission said.

Deora dismissed the charges.

"The final policy has been announced keeping in mind the interests of all the stakeholders. Some players wanted to make changes, while others were opposed to it. The minister cannot keep everybody happy," he said.

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