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India to launch rules to end gas distributor's monopoly in 34 areas

GAIL feels a merger with ONGC makes more sense since it would integrate the gas producer with transportation and marketing networks. Photograph:( Others )

Reuters New Delhi Jul 16, 2019, 03.32 PM (IST)

The Indian government is set to introduce rules in six months that could lead to the phase-out of monopolies controlled by natural gas distribution companies in 34 cities, including New Delhi and Mumbai, allowing many consumers to choose a new supplier, a senior regulatory official said.

In 2009, natural gas supply regulator - the Petroleum and Natural Gas Regulatory Board (PNGRB) - gave exclusive gas marketing rights, initially for five years, to companies who had established gas distribution networks in cities across the country.

It allowed them to use their pipelines exclusively for 25 years to help them recover billions of dollars they had invested.

However, now one of the three members of the PNGRB's board said the regulator is soon moving to open up the still relatively new business to the competition.

"These companies have more than recovered their costs as indicated by their profitability and market cap," said the board member, Satpal Garg, who is in control of its commercial and monitoring responsibilities.

"The rules will be ready in three months, and implementation would take another three months as the regulator will first seek feedback from companies and the public", he said.

The move could affect the business of GAIL (India) Ltd, formerly known as Gas Authority of India Ltd, the biggest gas distributor in the country.

GAIL has direct or indirect control of many of the single-city distributors, such as Mahanagar Gas Ltd in Mumbai, Indraprastha Gas Ltd in New Delhi. They could now face new competition.

Another major player, Gujarat Gas Ltd, could see potential rivals consider moving into the 11 cities in which it distributes gas, including Jamnagar, Ahmedabad, Hazira, Surat and Rajkot in western Gujarat state.

Some cities awarded to Indian Oil and Adani Gas Ltd would also now be open to new distributors, under the new provisions.

The liberalisation could, though, also allow some better capitalised and more aggressive firms, including some associated with GAIL, and Adani Group, to challenge existing distributors in other cities.

No immediate comment was available from the five companies.

Story highlights

GAIL has direct or indirect control of many of the single-city distributors, such as Mahanagar Gas Ltd in Mumbai, Indraprastha Gas Ltd in New Delhi. They could now face new competition.