SC ruling frees gas distributors from pricing scrutiny

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New Delhi | Updated: July 3, 2015 1:22:15 AM

Wednesday's Supreme Court ruling that Petroleum and Natural Gas Regulatory Board (PNGRB) doesn't have the power to fix the retail price of gas...

Wednesday’s Supreme Court ruling that Petroleum and Natural Gas Regulatory Board (PNGRB) doesn’t have the power to fix the retail price of gas has made it clear that consumers across the country will continue to pay market prices for piped cooking gas and compressed natural gas (CNG).

City gas distribution (CGD) companies across the country such as Indraprastha Gas Ltd (IGL), Adani Gas, GAIL Gas and Maharashtra Natural Gas Ltd (MNGL), among others, would be free from any regulatory scrutiny when it comes to the pricing of the fuel they supply to households, industries and for transportation.

“PNGRB completely respects the honourable Supreme Court’s order. The board would study the verdict carefully and would decide in the due course if any follow-up action needs to be taken keeping in mind best industry practices,” S Krishnan, chairperson of PNGRB, told FE. Sources said that the board is not considering filling any curative petition before the apex court.

On July 1, the Supreme Court pronounced its verdict in a dispute between IGL and PNGRB, where IGL had contested the PNGRB order of April 9, 2012, asking the CGD firm to reduce its network tariff by 63% and CNG compression charge by about 59%.

Industry watchers feel that the verdict would have implication on all CGD firms across the country. The price to be charged from a customer for piped natural gas (PNG) and CNG would be decided solely by the CGD companies. The firms would not be liable to disclose the components of the final pricing such as compression charges or marketing margins. This would continue till the time government notifies the product and bring it under PNGRB purview.

“On the one hand, the government has allocated cheap domestic gas to the CGD sector, taking it away from other sectors such as power and fertilisers. And on the other hand, there is no watchdog for prices being charged by the CGD firms,” said an industry official, who did not wish to be named.

“The Supreme Court has finally given its verdict on the lingering PNGRB-IGL case. It has upheld the high court order ruling in favour of IGL. This comes as a big relief to all the city gas distribution companies as the verdict clearly concludes that PNGRB has no power to fix or regulate the final price of compressed natural gas (CNG) or piped natural gas (PNG),” Emkay Global Financial Services said in its July 2 note.

The dispute between IGL, which supplies CNG/PNG in the national capital region, and downstream regulator PNGRB started when the latter on April 9, 2012 asked the firm to reduce its network tariff by 63% and CNG compression charge by about 59%. On June 1, 2012, the Delhi High Court had held that PNGRB is not empowered to fix or regulate maximum retail price at which gas is to be sold by IGL to its consumers. The high court judgment had also held that the PNGRB is not empowered to fix any component of network tariff or compression charge for any entity like IGL having its own distribution network. On July 1, the Supreme Court upheld the high court order.

“This verdict is bound to be a big boost for the entire CGD sector in the country, which would now be looking at expansion in mission mode as per the vision of the government for providing clean energy solutions to the nation,” said Narendra Kumar, managing director of IGL.

The Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted under the Petroleum and Natural Gas Regulatory Board Act, 2006. However, industry watchers feel that the apex court up holding the lower court verdict is not “out of the blue”. The PNGRB has faced many such issues since its inception in October 2007, said another industry official.

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