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After IGL order, regulator puts brakes on tariff orders

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Following the setback in its legal dispute with (IGL), downstream oil regulator (PNGRB) has put on hold its order on the rates charged by city gas distribution companies. The regulator is awaiting clarity on its statutory powers before proceeding on the contentious issue of rates.

Earlier, the board had planned to come out with an order on the network rates and compression charges for various companies like (Bharuch, Surat), (Mumbai), Maharashtra Natural Gas (Pune) and Central Uttar Pradesh Gas (Kanpur), after its order on IGL’s rates and compression charges. “We are ready to come up with orders for most city gas entities. However, we are not going ahead after the high court order in the IGL case. We will wait for clarity,” said a board official.

In April, PNGRB had passed an order directing IGL to reduce prices for its consumers in Delhi with immediate effect, after factoring in the reductions in both network rates (for compressed natural gas, piped natural gas and industrial consumers) and the compression charges levied only on compressed natural gas. It had also asked the company to pay the refunds since financial year 2008-09, based on the changes. Financial year 2008-09 was the first operating year for the company, after its board was formed in October 2007. The refund is estimated at Rs 1,000 crore.

However, IGL moved the Delhi High Court, challenging the order. It said PNGRB was not entitled to regulate the prices of gas sold by the company and the variables taken into account by the board to calculate the network rates were misleading. In its judgement on June 1, the court said PNGRB was not empowered to fix any component of network rates or compression charges for entities such as petitioners who had their own distribution networks. PNGRB has not challenged the order.

According to rating firm Icra, the high court order has led to uncertainty regarding the functioning and regulation of the city gas distribution sector. The recent verdict has raised several issues about PNGRB’s role, with respect to determination of rates.

Icra said the court ruling suggested according to the provisions of the

PNGRB Act, the only rate that could be regulated was the one for transportation, applicable for usage of an entity’s distribution infrastructure by another entity (a third-party marketer operating under an open access regime).

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