Not quite the right way to draft gas sector regulations

Vol 11, PW 11 (04 Oct 07) People & Policy

Unease continues in India’s gas sector over how the Petroleum and Natural Gas Regulatory Board is drafting regulations for the emerging domestic gas market.

Concern centres on the regulator’s decision – supported by the oil ministry – to appoint officials from state-owned companies GAIL and Indian Oil to head advisory panels that will draw up the rules. “This is the wrong way to go about it,â€‌ says a source at a major private sector gas company.

“The rules and regulations should be drawn up by an independent consultant with previous experience of the sector and this draft should be placed before all the stakeholders.â€‌ It is best, we are told, if the regulator did this himself and, “did not depend on people seconded to the board from GAIL or other (state-owned) companies.

â€‌ In August 1996, reports a source, London-based consultancy National Economic Research Associates prepared a report called Regulatory Framework for Gas Industry in India, sponsored by the Asian Development Bank. This report recommended the â€کunbundling’ of India’s nascent gas business.

“A similar method should be followed (for the gas sector rules and regulations),â€‌ we are told. “If you depend on advisory panels headed by people from GAIL it will lead to regulations coloured by the interests of these companies.

â€‌ Those on the advisory panels, “already have certain positions on aspects of the business.â€‌ A consultant may not possess detailed knowledge of Indian conditions but “his draft can be easily tailored to suit local needs.

â€‌ Britain took nearly 10 years to finalise its gas sector regulations. “This cannot be done overnight through advisory panels as the (Indian) regulator wants,â€‌ adds a source.

“The entire exercise is a long drawn out learning process. It is very important to begin right so the final product stands the test of time and does not protect today’s inefficiencies.