New gas policy to follow common carrier principle

NEW DELHI: The final contours of the gas pipeline policy is falling in place. The pipeline sector, which has recently attracted investor interests from large corporates including RIL, British Gas, ADAG, Gail, among others, will be developed on a common carrier principle and will allow exclusive rights for the developer for the initial few years. Companies having common interest in marketing and pipeline transporation will, however, be required to separate out operations and maintain arms length distance.

In order to ensure efficient and timely completion of city gas distribution projects, the proposed policy may ask companies to offer bid bonds. In case of any default by the company, the bond amount furnished by it would be forfeited. The bid bond will, however, be changed into performance bond after completion of the project.

Explaining the exclusivity factor a source in the government said being a highly capital incentive business it is necessary to incentivise investments in city gas distribution network. “Once distribution network is developed and sufficient sales volume is reached, competition can be allowed by removing marketing exclusivity,” the source said.
When contacted petroleum minister Murli Deora said that the policy would be announced ‘soon.’ “The first priority of the policy would be to ensure that consumers get good and cheap fuel. Gas prices will be monitored by a regulator to ensure fair-pricing. At the same time, the policy will also make the sector investment-friendly,” he told ET.

Mr Deora said “the policy would not be rigid. Changes could be incorporated in it even at a later stage, depending on the changed market situation.”

The proposed policy will make it mandatory for operators to lay a gas pipeline with 33% additional capacity (in addition to its own requirement) for common carriage. “This extra capacity shall be available to other entities on first-come-first serve basis at regulated transportation tariff,” a source said.

According to petroleum ministry, the proposed policy aims at creating infrastructure to provide piped natural gas to 20m urban households in various cities in two-three years time.

The oil and gas exploration policy implemented by the government of India since ’00 has resulted in yielding large quantities of natural gas as the blocks are becoming operational. The gas available will be to the tune of 100m cubic metre, initially.

After meeting the primary demands from fertiliser, power and other industries the gas will be provided to urban household sector as cheaper and cleaner fuel for domestic purposes. Recently, Mr Deora had convened a meeting of all stakeholders in Mumbai to discuss various issues related to the policy.

Meeting was attended by various institutions and companies including BG, Shell, RIL, ADAG, public sector oil companies, Teri and Planning Commission.