Government gives power to oil regulator to issue gas distribution licences

Nearly three years after the Petroleum and Natural Gas Regulatory Board (PNGRB) came into existence, the government has notified a crucial section that now gives the oil regulator explicit powers to issue city gas distribution licences.

Section 16 of the PNGRB Act of 2006 has been notified with effect from July 15, official sources said.

The PNGRB, which is to regulate petroleum product and natural gas sector, came into existence in October 2007, but Section 16 of the Act was not notified by the government.

The section gives PNGRB powers to authorise companies to retail CNG to automobiles and pipe cooking gas to households.

Sources said PNGRB, however, did not feel constrained by the absence of Section 16 and held two rounds of bidding for giving city gas distribution rights.

In March last year, it conducted the first round for six cities — Kakinada in Andhra Pradesh, Mathura and Meerut in Uttar Pradesh, Kota in Rajasthan, Dewas in Madhya Pradesh and Sonepat in Haryana.

GAIL Gas Ltd., a wholly-owned subsidiary of GAIL India, swept the round bagging five cities. Bhagyanagar Gas Ltd, an equal joint venture of GAIL and Hindustan Petroleum Corp, got the sixth city of Kakinada.

In the second round in August, PNGRB invited bids for seven cities, including Ghaziabad, Allahabad and 

Chandigarh.

Indraprastha Gas Ltd, which claimed it had Central government and Supreme Court authorisation for retailing CNG and piped gas in Ghaziabad, challenged in the Delhi High Court the PNGRB’s authority to issue licences in absence of the Section 16.

The High Court in January ruled that PNGRB had no powers to issue city gas authorisation, leading to scrapping of the second round.

After the High Court ruling, the authority to issue CGD licenses fell on the Central government which authorised winners of the first round of auction conducted by PNGRB and explicitly gave the licence for Ghaziabad to IGL, they said.

Armed with the Section 16, the regulator is likely to come out with a third round of auction this month. Six to seven cities may be offered in the round, sources said.