Sudden death of the Natural Gas Pipeline Policy

Vol 8, PW 17 (17 Nov 04) People & Policy

India has abandoned moves to introduce separate legislation to oversee the construction of gas transmission pipelines through a Natural Gas Pipeline Policy.

An oil ministry recommendation to cabinet seen by this report clearly states that regulation of the gas transmission sector should fall within the remit of the proposed Petroleum Regulatory Board Bill to be passed in the winter session of parliament. The draft (Petroleum Regulatory Board) Bill includes provisions to regulate the natural gas sector, including regulation of natural gas transmission pipelines of an evolving national gas grid, reads the note.

Most to lose from the new legislation will be GAIL, which will be stripped of its monopoly. Others will lose too: the note only allows genuine transmission pipeline construction companies to build gas transmission pipelines.

Any entity desirous of applying for and laying transmission pipelines will have to give an undertaking that its sole business activity is transportation of natural gas and it does not have any business interest in marketing or exploration of gas, reads Section 9 of the note. Any existing entity which has already been granted the right to lay a pipeline, or is desirous of doing so in the future, will have to un-bundle its business accordingly.

If such an authorised entity has a related entity - a parent company or a subsidiary - which has a business interest in related areas of gas exploration and marketing, an arms length relationship between the two of them should be ensured. GAIL will have to accelerate plans to hive of its gas transportation business into a separate company if it wants to be eligible.

Indian Oil will also have to separate its pipelines division into a subsidiary if it wants to continue building gas pipelines.