Gail against gas pipeline privatisation

Gail India has protested Petroleum Minister Mani Shankar Aiyar's plans to open up laying of natural gas pipelines to the private sector, saying competition cannot protect consumer interest.

Aiyar had on Wednesday said he was against Gail monopoly over the proposed 8000-km national gas grid that would connect gas sources to consumption points.

Gail chief Proshanto Banerjee has shot off a letter to petroleum secretary S C Tripathi saying the revised draft on the national gas pipeline policy that allows producers and importers of natural gas to lay pipelines to consumers, "might lead to skewed development of gas market in the country."

Currently, all gas pipelines in India are owned by Gail.

"Keeping in view the similarities between the gas and power sectors, especially the transmission segment which is a natural monopoly, it is a well defined regulation rather than promotion of competition that has been found to be effective in protecting the interest of consumers," Banerjee wrote.

The Gail chairman and MD claimed "a study conducted by Gail on the evolution of integrated gas grid in 38 countries accounting for two-thirds of the global gas consumption also overwhelmingly supports the single agency model (for laying gas pipelines)."

The revised draft on the national gas pipeline policy, which has been made into a cabinet note for approval, states that the regulator would sanction laying of gas pipelines upon the proposer showing pre-arranged source of natural gas and market tie-up.

"We are of the view that the mechanism for grant of authorisation (for laying pipelines)

is unique and may not have any parallel. Even in the most liberal US gas market where multiple-entity concept is in practice, there are no pre-set criteria like supply and market tie-up to be achieved by the transporter, to become eligible for grant of authorisation by its regulator," Banerjee wrote.

Opening up of the pipeline business would benefit firms like Reliance industries, which having struck huge gas reserves, were unable to monetise them for want of rights to lay pipelines to consumers.

The revised policy, Banerjee said, "favours the upstream companies with regards to grant of authorisation for onshore pipelines and such upstream companies, which also have considerable downstream interests in gas-based end use, would be encouraged to set up separate subsidiaries for the pipeline projects to secure authorisations."

"Such end-to-end business interests would implicitly create bundling of businesses and the resultant very large enterprises would have considerable control on the energy security and energy flow in the country."

Banerjee said private sector may selectively target lucrative markets, and create unwarranted gas-to-gas competition in select markets, and suggested constitution of a body of experts "well versed with international practice to submit a report" on merits and demerits of single-entity vs multiple-pipeline multiple-entity concepts.