Gas pipelines set to compete on price - Indian Express

The Petroleum and Natural Gas Regulatory Board (PNGRB), the downstream regulator in the energy sector, has proposed to give gas pipeline operators freedom to compete in overlapping areas so that consumers benefit by way of lower tariff and softer gas prices.

Now, pipeline operators like Gail India and Reliance Gas Transportation Infrastructure do not have that freedom and have to charge the regulator-fixed tariff without a premium or discount.

PNGRB has now proposed that in overlapping areas, say, Uran in Maharashtra, there should be pipeline-to-pipeline competition, which is good for consumers of gas including commercial establishments, hotels and auto CNG consumers. The regulator wants pipeline operators to charge less than the tariff ceiling fixed by it without discriminating among consumers.

The decision would impact the gas market more decisively when a well-developed natural gas pipeline grid is in place. The beneficiary, of course, would be the consumer. “If pipeline operators are allowed to charge a more competitive rate, it will be beneficial to the ultimate consumer,” Ernst & Young partner and national oil and gas leader Ajay Arora said.

Now, there are two levels of competition in gas transportation business: at the time of inviting competitive bids from potential investors to lay pipeline and subsequently when one third of an operator’s capacity is reserved (as is mandatory) for use by other parties for a fee. The transportation tariff fixed by PNGRB takes into account all cost factors and allows a 12% post-tax return for the operator. The idea now is that there should be an extra layer of competition in overlapping areas, where consumers could benefit from the choice of more than one pipeline and be able to transport gas at a lower price. PNGRB has invited comments on the proposal from all stakeholders before notifying it.

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