Current regulation under the Petroleum & Natural Gas Regulatory Board (PNRB) requires review with respect to; i) empowerment, ii) Gas Act, iii) performance since inception, and iv) restructure/remodeling to meet the basic objectives. Experience worldwide indicates that regulatory regime has gradually been evolved and enrichment has come only depending upon nature of market, support from government and industry.
In India, empowerment and clarity is the key factor with respect to functioning of the board. Besides this, producers, transporters and the Board have to act in tandem to mutually supplement the effort at least for the first five years. Unfortunately, in India there has been no serious effort in this direction and, therefore, there is need to relook and review for better functioning of the Petroleum & Natural Gas Regulatory Board.
Success of Regulatory Board would depend upon consensus & unanimity among legislatures, executives and industry. There is general talk that sufficient empowerment has not been given to the board so far by the administrative ministry and there is need for immediate re-looking into the reasons for the same and take remedial measures without further delay.
Also, the board has to make its objective clear and retrospect itself whether it has really met efforts in line with world?s best practices. Whether they have been able to prevent discriminatory preferential services? Whether they could prevent inefficient and unfair pricing? Whether wasteful duplication of facilities have been prevented? Whether safety norms have been followed and environmentally sound energy infrastructure as per government policy has been created?
Whether the customers? interest has been protected based on the principle of equity? How many orders the board has issued so far to ensure adherence of such code? Probably there would be disappointment if we really assess the situation based on the above parameters.
Growth of City gas distribution (CGD) has been rather slow after the Regulatory Board came into effect from October 2007. Prior to formation of the board, a number of joint ventures came into being and cities were added for supply of Piped Natural Gas to domestic (PNG) and Compressed Natural Gas to transport (CNG) sector.
Incidentally new cities could not be added after the formation of the board even though few Cities have been authorised but actual supply has not started as yet. With this speed, probably it will take years and years to reach the goal of putting 230 cities on city gas distribution map and, therefore, special attention is required from the board for taking the benefit of natural gas to the rural areas which is in line with the vision of inclusive growth. CNG corridor for India is also a far-distant dream.
Probably India has to learn from similar situation which prevailed earlier in the US during mid seventies. 1978 saw the peak of gas supply shortage in the US and a Legislation of Natural Gas Policy Act (NGPA) was enacted as a part of National Energy Act (NEA) to protect consumers from the hazards of monopoly.
The act had main objective like; i) Single national natural gas market, ii) allowing market forces to establish wellhead price, and iii) eliminating mismatch of supply and demand. Probably India needs micro analysis of prevailing situation and immediately go for Technical Advisory wing to the board/government for the growth of gas industry.
Price is the key issue today in the Indian gas market. As many as fifteen prices are prevailing. Consumers are in stage of utmost confusion and are subjected to coercion while finalising the long-term gas purchase contracts. In the Indian regulatory regime, the wellhead price is not under the purview of the board which is quite in line with the international practice. But at the same time, the government cannot be kept away from the responsibility of settling wellhead price in the interest of the consumers.
As early as in 1940, the Supreme Court in the US had considered that wellhead price are subject to government oversight ? if the producer and the pipeline are affiliated companies. The spirit being that it cannot be left to the sweet will of producer to give favourable treatment to their affiliates.
In no case the producer should be permitted to be transporter or supplier as the same would lead to discriminatory, monopolistic trend. We should not allow to create a situation when consumers are subjected to receive the feed stock/fuel at different price and compete for the finished product in the open market. As a matter of fact, such situation is prevailing in India at present. Therefore, there is no harm if PNGRB, suo moto takes up the cause of price fixation aspect for the sake of growth of gas industries.
Another key area which the Board would be required to look into shall be creation of a data bank on all aspects of petroleum & gas sector. Probably, no effort has been made so far by the Board or at least it is not known to public. Such a data-bank would serve the real central system for growth of petroleum & gas sector and the Board need to immediately look into this direction as nodal point.
If we evaluate the Indian regulatory body on above considerations, probably we have to confront with disappointment. It appears that there is need to relook and make suitable modifications after thorough brainstorming among all concerned viz. legislatures, executives, academicians and experts. There is no harm in that as worldwide regulatory regime has been subjected to a number of gradual revision and reforms. For the benefit of the industry, regulators have always adopted light-handed approach than being hard and harsh to promoters. Let us act in this direction for the growth of Gas Sector in our country.
The writer is director-general, SCOPE