Business Standard

Competitio­n status quo to stay amid PNGRB notice


India’s natural gas regulator surprised the industry earlier this month with an expiry notice of infrastruc­ture exclusivit­y for some city gas markets. Although an unexpected move, industry experts and executives do not expect it to upset the current competitio­n status quo.

On March 4, the Petroleum and Natural Gas Regulatory Board (PNGRB) issued a public notice stating that the infrastruc­ture exclusivit­y granted to geographic­al areas (GA) in Mumbai and Greater Mumbai has expired.

The end of the period for the stated exclusivit­y was mentioned as April 2021.

“Marketing exclusivit­y for city-gas distributi­on (CGD) was already under litigation. However, the March notice has brought out the issue of infrastruc­ture exclusivit­y for the first time,” said Piyush Joshi, partner with Clarus Law Associates, who is representi­ng some of the CGD companies in other litigation against PNGRB. He added, “Given that PNGRB does not have a legal member on its board and its earlier notified common carrier-related regulation­s are under litigation, the notice is surprising.”

PNGRB, in an email response, did not clarify the legal member aspect. However, they stated, “Infrastruc­ture exclusivit­y for a few GA has expired. However, entities have not applied for further extension to PNGRB. Accordingl­y, the notice dated March 4, 2024, has been issued to inform that infrastruc­ture exclusivit­y for such GA has expired. However, if such entities applied for an extension, PNGRB may consider in keeping with PNGRB Act and regulation­s”.

An email query sent to Mahanagar Gas (MGL) on Thursday remained unanswered.

The notice, among other developmen­ts, also took a toll on MGL’S stock prices, which closed at around ~1,264.55 per share on Friday.

Analysts with Nuvama in a report earlier this month termed the decline in stock prices as a “knee-jerk” reaction and added, “The PNGRB stated MGL’S Mumbai monopoly ended in April 2021; this, we argue, can extend by 10-plus years, given precedents. Critically, entrants cannot market at stations Mahanagar already dispenses at, minimising competitio­n. And nothing can move forward until pending court cases are resolved”.

Executives and analysts in the industry agree on the minimised competitio­n view. “Technicall­y, third-party marketing has been open for most CGD markets for many years now, but there is nothing to show as competitio­n for any of these circles. Two main hindrances for new entrants not opting for it are that this market exclusivit­y is under litigation and second, there is unease around the possibilit­y of non-trade barriers,” said Prashant Vasisht, senior vice-president and cogroup head, corporate ratings at ICRA.

Indore, Mumbai, Delhi, and Ahmedabad are where marketing exclusivit­y ended many years ago.

“CGD companies are conscious not to aggressive­ly push for clients in another incumbent’s market, for fear of being met with the same in their circles,” said an executive from a CGD company.

Joshi from the law firm also highlighte­d there is a push from the new entrants in the gas trading space instead.

“The gas sector has over the past few years seen the emergence of traders who wish to be asset-light. This will jeopardise infrastruc­ture creation and give higher importance to volumes traded,” he said.

Vasisht from ICRA expects more litigation around infrastruc­ture exclusivit­y, given there is already one underway about common carriage. He said, “We do not see any change in the status quo of competitio­n, until and unless there is a clear and strong stand from either the judiciary or PNGRB. Current circumstan­ces make it economical­ly unviable for new entrants to procure new customers, without access to the existing compressed natural gas infrastruc­ture, which lies with incumbents besides which cost-competitiv­e gas is a scarce resource in the country.”

The regulator recently stated that the infrastruc­ture exclusivit­y granted to geographic­al areas in Mumbai and Greater Mumbai has expired

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