THE IGL ISSUE; INTERESTING INPUTS

I picked up some interesting insights on the Net, into the recent HC Order quashing the PNGRB Order on IGLs gas pricing. Am appending them hereunder for the benefit of readers of this Blog;

The PNGRB is all set to challenge the June 1 order of the High Court quashed the regulator`s powers to fix network tariff and compression charges for a CGD outfit with its own distribution network in the Supreme Court.The PNGRB, in its order, had asked IGL to lower its network tariff from Rs 104.05/mmbtu to Rs 38.58/mmbtu and compression charges from Rs 6.66/mmbtu to Rs 2.75/mmbtu.
8It had even directed IGL to refund the difference in these two levies to consumers on a retrospective basis from April 1, 2008. 8IGL would have had to take a hit of Rs 1,560 crore -- enough to wipe out its networth if the orders were to be implemented. In due course, other CGD entities would also have been hit by similar orders.8S Krishnan, Chairman, PNGRB said, “Let me read the order before coming to any conclusion, it is not available as of now and only then will I be able to decide on my options. I have full respect for the judiciary.”8"Perverse order": However a source in PNGRB said, “This is a perverse order, we will definitely appeal. We all know that the Act is badly drafted, the Court should have gone into the legislative intent of the Act, they should have called for the parliamentary debates, the minutes of the Parliamentary Standing Committee meetings so that the perspective would have been clear. If the Board does not decide on these components of pricing of a ‘monopoly network infrastructure’, then who will? There is a thing called ‘network infrastructure and non-network infrastructure’: pipelines, gas, roads, electricity etc. are network infrastructure, so if there is a monopoly and if you leave it unregulated, then the operators can start charging exorbitantly. The car and FMCG/soap markets don`t need a regulator, but here, especially, when you have just one operator, either the government or if you have a regulator, then the regulator has to regulate. Now, IGL, GGCL, Adani, they are not PSUs, so the government cannot pass orders for them, so the consumers will be at the mercy of these operators, this cannot be allowed.”8"Will go to SC": Concurred L Mansingh, former Chairman, PNGRB, “This is not final, this will go to the SC, we will have to see on what basis the Court has come to this decision. The Board was not doing something on its own discretion, it is there in the Act, why did IGL participate in the consultations, why didn’t they then say that the regulations should not be framed?”
"Order will be struck down": Speaking on the High Court order, a CGD insider said, “This is a bad order and it will be struck down in the SC. The regulations pertaining to network tariff were made under the guidelines of the Act, after an open house and public consultations. Everyone was invited and IGL should have vented their feelings against such regulations then. However, the SC judgement will most likely take a couple of years by which time the Board’s authority will have taken a beating.”

On the various possibilities in the future on the subject of network tariffs and compressor charges, a legal expert opined that if the SC chooses to give a stay, the PNGRB order would become operational. 8Alternatively, the central government can issue an ordinance amending the Act to bring clarity, but that`s unlikely because of strictures from the court. 8If the regulations have been ruled to be ultra vires, this would imply that the regulator will have to form new regulations. And it will take more than a year to do that as a process of public consultations will have to be gone through again. 8An analyst who watches the sector closely said, “See this has opened a Pandora’s box. Now even the Pipeline Tariffs will be questioned, all entities will jump in the fray. Even CGD auctions will be questioned.” 8It must be mentioned that even in US, EU and Japan, which boast of free markets, the network infrastructure is always regulated, either by the government or the regulator. 8Also this judgement is a rap on the wrist of the government because the PNGRB was being represented by none other than the Additional Solicitor General. 8The next few weeks are crucial. Gas has been termed the fuel of the future but there is no clarity of policy in sight. 8The government, the regulator, the operators and the judiciary are all at loggerheads with each other and no one is willing to budge