SC turns down gas regulator's plea to determine tariff

Companies supplying gas are now free to set their own tariffs - both network tariff and compression charges for CNG, ruled the Supreme Court on Wednesday as it turned down a plea by the Petroleum and Natural Gas Regulatory Board (PNGRB) to regulate the prices of inter-city supplies.

"The power to fix the tariff has not been given to the board. In view of that, the board cannot frame a regulation which will cover the area pertaining to determination of network tariff for city or local gas distribution network and compression charge for CNG," said a bench of Justice Dipak Misra and Justice Uday Umesh Lalit in their judgment.

Dismissing the PNGRB's plea, the court also quashed the regulation it had put in place.

"As the entire regulation centres around the said subject, the said regulation deserves to be declared ultra vires, and we do so," the court said. "Ex consequenti, we find no substance in this appeal and accordingly the same stands dismissed."

The entire matter is rooted in PNGRB's April 9, 2012 order, which had fixed the network tariff and compression charges for CNG for Delhi City Gas Distribution (CGD) network of the Indraprastha Gas Ltd (IGL) at Rs.38.58 per MMBtu and Rs.2.75 per kg. respectively. The same was to come into force retrospectively from April 1, 2008. This was initially challenged by IGL, but in the apex court, six more companies impleaded themselves saying that they too would be affected.

By the said order, the IGL was expected to reduce the selling price of CNG from April 9, 2012, in a way to compensate the consumers across the board for the excess prices charged from them from April 1, 2008.

However, the April 9, 2012 order was set aside on June 1, 2012 by the Delhi High Court, which had asked the IGL to "recover the said network tariff and compression charges for CNG separately through an invoice, without any premium or discount on a non-discriminatory basis and to appropriately reduce the selling price of CNG from the date of issuance of the order".

However, the PNGRB had left the modalities and time frame for refund of differential of the excess network tariff and the compression charges for CNG collected by the IGL from April 1, 2008, till April 9, 2012 from its consumers to be decided subsequently.

The PNGRB had challenged a the high court order which had held that the board was not empowered to fix or regulate the maximum retail price at which gas is to be sold by IGL to the consumers, and also not empowered to fix any component of network tariff or compression charge for an entity having its own distribution network.

It had also thus termed "unsustainable" the stand that the provisions of Petroleum and Natural Gas Regulatory Board (Determination of Network Tariff for City or Local Natural Gas Distribution Networks and Compression Charge for CNG) Regulations, 2008 empowered the board to fix the tariff.

As a consequence, PNGRB's April 9, 2012 order was not in consonance with the Petroleum and Natural Gas Regulatory Board Act, 2008.