IGL, MGL may lose exclusive supply rights
After the adverse tariff and compression charges order, the capital’s monopoly compressed natural gas (CNG) and piped natural gas (PNG) player Indraprastha Gas Ltd (IGL) may lose its marketing exclusivity to new players. Downstream petroleum regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB) is finalising an access code that will throw Delhi and Mumbai open to other city gas entities that can use IGL’s and Mahanagar Gas Ltd’s (MGL) spare pipeline capacity to market gas. Marketing exclusivity, the condition under which only IGL and MGL could market CNG and PNG in their respective cities, ended in January 2012.
IGL could be the first city to see entry of a new player. “A separate access code is being developed that will lay down the guidelines for allowing new companies to use spare pipeline capacity available with the existing monopoly entity like IGL and MGL," said a PNGRB official, adding the access code would take two-three months.
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Once Delhi and Mumbai are opened and there is spare capacity for a combination of pipeline entry and exit points, a different city gas player can use this capacity to market gas and pay tariff to IGL or MGL. The rationale behind granting exclusivity to a city gas entity in any city is to develop the market.
IGL has been operational since 1998 while MGL is functional since 1995.
Both Delhi and Mumbai are considered to be developed city gas markets. IGL caters to around 500,000 vehicles and has over 330,000 PNG connections. Likewise, MGL has already connected over 550,000 households to PNG and supplies CNG to over 230,000 vehicles.
Both IGL and MGL were given authorisation by PNGRB in January 2009 and were granted a three-year exclusivity period from the date of authorisation. IGL, however, has demanded that the three year period should be counted from the date when Section 16 of the PNGRB Act was notified, on July 15, 2010, and not from the date when the company got authorisation, in January 2009. It is this section authorises the Board to lay, build, operate or expand a city or local natural gas distribution network.
PNGRB regulations provide for a marketing exclusivity of three years for companies present in a city prior to the regulations and of five years for new ones. Companies in the city gas business are also entitled to a network exclusivity of 25 years, extendable by another 10 years if the operator meets all the terms and conditions. Marketing and network exclusivity period kicks in from the date of authorization.