GAIL fights PNGRB move to destroy its monopoly

Vol 17, PW 18 (24 Apr 14) People & Policy

GAIL is preparing to fight the PNGRB in the Delhi High Court this week over the regulator's move to break its business in two: transport and marketing.

GAIL has long been criticised by rivals and the PNGRB for its monopoly stranglehold over the gas business in India. As both gas transporter and seller, GAIL can pressurise customers into accepting ‘bundled’ deals with little or no commercial transparency.

More, it can win new customers more easily than rivals by offering low marketing margins since it already earns money on transportation. On February 24 the PNGRB published its ‘Policy for Development of Natural Gas Pipelines’, which includes a provision to split GAIL into two legal entities beginning 2016.

GAIL says two years isn't enough to ‘unbundle’ its business, which supplies gas to more than 700 customers across 16 states. A senior GAIL officer justifies its monopoly saying the Indian gas market isn't mature enough to support multiple competitors.

There aren't enough customers to go around, he argues, and pipelines will remain underutilised. “Unbundling will lead to stranded pipelines,” he says.

“Any new pipeline company won’t be able to source gas.” If GAIL volumes fall, he adds, costs will rise, further scaring off price-sensitive power and fertiliser consumers.

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