Carve up GAIL to emulate Gujarat success story

Vol 13, PW 3 (16 Jul 09) People & Policy

Private investors never tire of pointing to Gujarat as a truly â€کopen access’ gas transmission system offered by local government-owned Gujarat State Petronet.

“From day one there has been genuine â€کopen access’ to this system with no discrimination against anyone, be it GSPC or competitors,â€‌ we hear. “But GAIL is still reluctant to open up the HBJ to competitors, even though in theory there is â€کopen access’.

â€‌ Among private gas operators GAIL stands accused of having the power to â€کkill off’ potential rivals to companies where it is a major stakeholder like GAIL Gas or Indraprastha Gas by deliberately delaying access to its gas transmission network. “None of the regulations drawn up by the gas regulator compel GAIL to give connectivity within a specified period to CGD operators who have won a city gas distribution licence,â€‌ says one aggrieved bidder.

“If GAIL deliberately delays giving connectivity the CGD operator has no recourse. Any connectivity delay can throw the private player completely off balance.

â€‌ Some investors accuse the oil and gas regulator of double standards. “If the CGD operator can’t begin gas supplies within the stipulated period in the licence he’ll be thrashed by the regulator and by the market,â€‌ adds a source.

“But there is no pressure on GAIL to provide connectivity.â€‌ One solution, argues a private investor, is for the regulator to draw up a priority user list for each transmission pipeline so the licence winner is guaranteed capacity - by law - throughout the 25-year licence term.

Others offer a more radical solution: break up GAIL into three component parts. For the gas transmission system to become truly open access as in Gujarat, they say, the government has no choice but to break up the company into gas producer, transporter and retailer, with separation even at accounting and board levels.

“Unless this is done,â€‌ we hear, “there will never be a level playing field in India’s gas retail sector.â€‌