The Telegraph
Since 1st March, 1999
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GAIL pipeline monopoly ends
- Policy ensures marketing exclusivity to city gas distribution projects

New Delhi, Dec. 20: Signalling an end to GAIL’s monopoly in laying inter-state pipelines, the government today unveiled a policy that is based on common carrier principle.

In another significant move, the government has laid down the rules for city gas distribution that allow companies to have monopoly for a certain period.

The pipeline policy provides for operators to build a minimum of 33 per cent extra capacity for leasing to third parties on a common carrier principle basis.

Petroleum minister Murli Deora said the policy aimed at facilitating open access to all who want to participate in a pipeline network on a non-discriminatory basis and to promote competition among entities. This would avoid abuse of the dominant position by any entity.

Until now GAIL had a monopoly over all inter-state pipelines and could charge its own tariff. Now companies such as Reliance that have made large gas discoveries will be allowed to lay down their own inter-state pipelines. They will, however, have to provide for 33 per cent excess capacity for the use of other companies that would wish to use their pipelines.

The petroleum and natural gas regulatory board, which will come into force by the end of January, will oversee all issues related to laying of pipelines and the tariff to be charged from other companies for the use of pipelines.

“The main thrust of the policy is to secure consumer interest, both in terms of gas availability and reasonable tariff,” Deora said.

According to petroleum secretary M.S. Srinivasan, companies wanting to launch city gas distribution projects for households and automobiles will be allowed to operate as monopolies for a certain period of time so that they can recover their investments.

“City gas distribution projects will have marketing exclusivity. A company or consortia granted a licence for a particular city will have marketing exclusivity for a certain number of years,” he said.

The period of exclusivity will depend on the size of the city and population and may vary between three and five years. It will also depend on investments made by the companies in city gas distribution projects and would be determined by the downstream regulator. “Most countries have a system of market exclusivity for city gas distribution projects,” Srinivasan said.

The policy will pave the way for Reliance to use its natural gas reserves in the eastern offshore KG basin for city gas distribution networks across major cities.

Srinivasan said the right of user acquisition for any transmission pipeline or local gas distribution project would only be considered by the Centre after the regulatory board has granted its authorisation.

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