Govt tweaks city gas supply norms

NEW DELHI: The government is busy giving final touches to the city gas pipeline policy which is likely to allow city-based companies a monopoly over their local markets. Put simply, all city gas companies will enjoy a monopoly for the first few years in the local markets before the pipeline infrastructure is thrown open to competition.

This will come as a major bonanza to the existing players like Indraprastha Gas — a joint venture of GAIL and BPCL, Mahanagar Gas — a JV between British Gas and GAIL and GSPC among others, who are already established players in the city gas distribution business. The monopoly over the markets will also be eligible for all new players like Reliance Industries or Reliance Natural Resources of the ADAG which are planning to enter the city gas distribution segment in a big way.

Initially, this policy may work against companies like ONGC or RIL which will have access to gas, but are not equipped with the pipeline infrastructure to service the markets. RIL and RNRL had, in fact, opposed the exclusivity clause that gave an advantage to the existing players. But the government feels that companies who have pumped in huge capital in building the infrastructure should be given a chance to service the market.

The monopoly clause will, however, not deter city gas marketers from multi-sourcing to get the best price for the consumers. In other words, a company like IGL, which does not produce gas, would have to look at the various price options being offered by the gas producing companies to get the best options for its consumers.

However, all potential city gas developers will need to find sustainable gas supplies if they are to get the marketing green signal. So, it may not be enough to just get a monopoly over the market, it would require sustainable gas supplies in place before the regulator gives the city gas company the required approval. This may immediately put gas producers like RIL, British Gas, ONGC at an advantage over the others.