The Petroleum and Natural Gas Regulatory Board (PNGRB) has issued several regulations governing different aspects of City Gas Distribution (CGD) Networks. Among these, the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 play a critical role in determining eligibility, authorization procedures and performance obligations for entities participating in the CGD sector.
This article examines certain key issues arising from the Authorizing Regulations, particularly after the amendments introduced on November 21, 2018, and highlights areas that may require further regulatory consideration.
REGULATORY BACKGROUND
The PNGRB, constituted under the Petroleum and Natural Gas Regulatory Board Act, 2006, has issued a comprehensive framework regulating various aspects of City Gas Distribution Networks.
As of November 01, 2019, the principal regulations governing the CGD sector include:
- Determining Capacity of City or Local Natural Gas Distribution Network Regulations, 2015.
- Integrity Management System for City or Local Natural Gas Distribution Networks Regulations, 2013.
- Access Code for City or Local Natural Gas Distribution Networks Regulations, 2011.
- Code of Practice for Quality of Service for City or Local Natural Gas Distribution Networks Regulations, 2010.
- Technical Standards and Specifications including Safety Standards for City or Local Natural Gas Distribution Networks Regulations, 2008.
- Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks Regulations, 2008.
- Exclusivity for City or Local Natural Gas Distribution Network Regulations, 2008.
- Determination of Network Tariff for City or Local Natural Gas Distribution Networks and Compression Charge for CNG Regulations, 2008.
The discussion below focuses specifically on the Authorizing Regulations and their practical implications for market participants. :contentReference[oaicite:0]{index=0}
1. INTRODUCTION
In exercise of powers conferred under Section 61 of the Petroleum and Natural Gas Regulatory Board Act, 2006, PNGRB has framed regulations for the effective governance and development of the natural gas sector.
The Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008, together with the amendments notified on November 21, 2018, establish the framework governing authorization of entities for development and operation of CGD Networks. :contentReference[oaicite:1]{index=1}
2. KEY CONCERN AREAS UNDER THE AUTHORIZING REGULATIONS
2.1 Misuse of Exclusivity Period
Regulation 12 grants an exclusivity period of eight years to authorized entities for laying, building, operating and expanding CGD Networks. Under specified circumstances, this exclusivity period may be extended.
The third proviso to Regulation 12 permits PNGRB to extend exclusivity where delays occur in commencement of gas flow through designated transmission pipelines.
While PNGRB is expected to evaluate the merits of each case before granting extensions, concerns remain regarding potential misuse of this provision by authorized entities and upstream gas suppliers seeking prolonged protection from competition. :contentReference[oaicite:2]{index=2}
2.2 Encashment of Performance Bonds
Regulation 16(3) empowers PNGRB to encash performance bonds after issuing notice to a defaulting entity and allowing a reasonable period for compliance.
No punitive action is contemplated if the defaulting entity remedies the deficiency within the prescribed period and to the satisfaction of PNGRB.
However, the regulations do not define what constitutes a “reasonable period,” thereby granting substantial discretion to PNGRB.
In the absence of clear guidelines, concerns have been raised regarding possible inconsistencies in implementation. Establishing objective criteria for determining reasonable periods could improve transparency and predictability. :contentReference[oaicite:3]{index=3}
2.3 Minimum Eligibility Criteria under the Expression of Interest Route
The eligibility requirements for participation through the Expression of Interest route continue to attract attention regarding their effectiveness in balancing technical competence and market competition.
Careful review of qualification criteria may be necessary to ensure that new entrants are not unnecessarily excluded while maintaining adequate safeguards for successful project implementation. :contentReference[oaicite:4]{index=4}
2.4 Penalties for Non-Performance
It has been observed that certain entities quote aggressive targets during bidding processes but subsequently fail to achieve those commitments during project execution.
Regulation 16(3) links penalties to the weightage assigned under bidding criteria, thereby seeking to discourage unrealistic bidding practices.
Strengthening penalties for shortfalls relating to PNG connections, CNG stations and infrastructure commitments may further discourage irrational bidding behaviour and improve project execution outcomes. :contentReference[oaicite:5]{index=5}
2.5 Absence of a Single Window Clearance Mechanism
Development of CGD Networks often requires approvals from multiple governmental and regulatory authorities, resulting in delays and increased project costs.
Introduction of a single-window clearance mechanism could significantly streamline regulatory approvals relating to laying, building, operating and expanding CGD Networks.
Such a framework would facilitate timely project execution and potentially encourage greater participation by private sector entities in future bidding rounds. :contentReference[oaicite:6]{index=6}
Joint Venture Eligibility Threshold
Regulation 5(6)(b) requires bidders to demonstrate prior experience in constructing hydrocarbon pipelines or CGD Networks of at least 300 kilometres.
The regulations permit formation of joint ventures with entities holding at least 11% equity and possessing the requisite experience.
However, an 11% equity stake may not necessarily confer meaningful management control or operational influence. Consequently, the adequacy of this threshold may warrant further review from a regulatory perspective. :contentReference[oaicite:7]{index=7}
3. CONCLUSION
The Ministry of Petroleum and Natural Gas, through the India Hydrocarbon Vision 2025, projected an increase in the share of natural gas within India’s energy mix from approximately 11% in 2010 to 20% by 2025.
However, industry studies indicate that natural gas consumption has faced challenges in achieving these targets. Reports have noted a decline in the share of natural gas within India’s primary energy mix from approximately 10% in 2010 to around 6.2% in 2017. Similarly, total gas consumption reportedly reduced from approximately 162 MMSCMD in 2011 to 145 MMSCMD in 2018. :contentReference[oaicite:8]{index=8}
Expansion of CGD Networks has also been affected by delays in obtaining multiple approvals and financial constraints experienced by certain market participants.
The relatively limited participation observed in earlier CGD bidding rounds further highlights the need for continued regulatory reforms.
Strengthening authorization procedures, introducing single-window clearances, improving penalty mechanisms and addressing concerns relating to exclusivity and eligibility criteria may contribute significantly towards accelerating growth of the CGD sector and supporting India’s transition towards a gas-based economy.
Regulatory reforms that improve transparency, encourage realistic bidding, streamline approvals and promote effective competition will be essential for achieving India’s long-term natural gas infrastructure and energy transition objectives.
