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Plan panel nixes Gail's national gas grid plans

March 22, 2004 09:41 IST

The Planning Commission has suggested that the government first set up a regulatory agency for gas pricing before allowing Gail Ltd to set up the proposed national gas grid.

In a presentation to the Planning Commission on March 18, Gail had made a pitch for being the sold implementing agency of the national grid. In its response to the presentation, the Planning Commission said granting exclusivity to Gail would be a "retrograde step".

According to the commission, granting exclusivity to Gail in any segment of the gas infrastructure will be counter-productive as the Petroleum Regulatory Bill, 2002, which is before Parliament, has provisions permitting multiple players for building and operating pipelines, along with non-discriminatory open access.

"Distribution of gas is a business distinct from the natural monopoly of gas transmission under an open access non-discriminatory regime. In the power sector, we are unbundling distribution from transmission to foster competition in distribution and here Gail is proposing that they be integrated," the Planning Commission said.

As Gail has both upstream and downstream interests and is the largest trader in the gas sector, the Commission has said there is no precedence under reform initiatives worldwide whereby the exclusivity sought by Gail can be conferred to it without unbundling the utility for making transmission possible on a non-discriminatory basis.

"Gail's gas transmission operations will have to be hived-off to the proposed exclusive transporter of gas. Such unbundling has to precede grant of exclusivity for trunk pipelines that are arguably a natural monopoly," the Plan panel has said.
BS Economy Bureau in New Delhi