Independent natural gas transport system operator likely soon

The oil ministry may soon float a cabinet note on setting up an independent transport system operator (TSO) to manage the common carrier capacity of natural gas pipelines to give all gas marketers a level playing field in the country, according to people with knowledge of the matter.

The common carrier capacity of a gas pipeline, which averages about a quarter of the full capacity, is managed by the company that laid the pipeline and now operates it. In most cases, these pipeline operators such as GAIL and GSPC also have gas marketing businesses. In this dual role, the operator also becomes a competitor for its pipeline customer in the gas marketing business.

To remove this perceived conflict of interest, and allow fair, transparent and non-discriminatory access to the gas grid to all gas marketers, the government is planning to set up the TSO, the people cited above said.

The TSO is aimed to be the single go-to source for all gas marketers to book common carrier capacity in gas pipelines. It will have a gas management control centre and a database management system. It will publicly display all relevant data on pipeline usage and charges.

ET was the first to report in December 2020 about the government's plan to set up a TSO. Finance minister Nirmala Sitharaman announced the plan in her budget speech in February 2021, following which the oil ministry prepared a detailed draft on the subject.

The draft proposed a government's stake of 51% in the TSO, with the balance equally owned by five state-run oil and gas companies. The proposed shareholding met with resistance from the finance ministry, which didn't favour creating a new state-run firm. Gradually, the oil ministry lost interest in the plan and buried the draft.

The plan has been resurrected now with industry players demanding it. The new draft is likely to propose a stake for the government in the TSO, but its extent is not yet clear, according to people with knowledge of the matter.

Indian Gas Exchange (IGX) CEO Rajesh Kumar Mediratta told ET recently that an independent TSO was needed to ensure fair access to the full capacity of pipelines for all market players. "The absence of transparent and non-discriminatory access to the gas grid impedes competition and, ultimately, stifles the growth of the gas market. The solution is to split the bundled entities into two, one to look after the marketing function and the other for transportation," he said.