Petro regulator gets House panel support on CNG regulation

While the Petroleum and Natural Gas Regulatory Board (PNGRB) got a legal setback after it decided to regulate the compressed natural gas (CNG) prices of Indraprastha Gas Ltd (IGL), Parliament’s Standing Committee on Petroleum and Natural Gas has supported such a price regulation. CNG prices in the capital have increased by 20 per cent in the calendar year, due to higher prices of imported gas.

The parliamentary committee said CNG was an important fuel for the transportation sector, while piped natural gas (PNG) was crucial for domestic, commercial and industrial customers. Any price revision would have a spillover effect on other sectors.

 

“In the cities, CNG and PNG are being supplied by a single entity. In the absence of competition, the entity should not take advantage and revise prices arbitrarily. Therefore, regulation of prices is desirable on the lines of other sectors like power,” the Committee recommended in its report tabled in Parliament yesterday.

Section 11 (f) of the PNGRB Act empowers it to monitor prices and take corrective measures to prevent restrictive trade practices of petroleum products and natural gas. However, this section has not been notified by the government. The Committee has recommended the petroleum ministry take immediate steps to amend the Act and empower the Board to fix or approve pricing.

City gas companies like Indraprastha Gas (Delhi), Mahanagar Gas (Mumbai), and Gujarat Gas (Bharuch and Surat) currently, enjoy the freedom to fix CNG and PNG prices. L Mansingh, former PNGRB chairman, told Business Standard there should be monitoring of prices and check on restrictive trade practices but he did not favour price regulation. “We have had enough instances of price control since Independence and it has clearly not worked. We should aim at bringing more competition to safeguard consumers’ interest,” he said.

IGL raised CNG prices thrice this calendar year, the last one in July. Prices have been increased due to impact of a sharp rupee depreciation that made imported natural gas costlier. In addition, cost pressure came on account of a 23 per cent rise in electricity rates and an increase in minimum wages. 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 CNG, PNG and industrial consumers) and the compression charges levied only on CNG.

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. It said PNGRB was not entitled to regulate the prices. In its judgement on June 1, the court said PNGRB was not empowered to fix any component of network rates or compression charges. PNGRB has moved apex court challenging the order.