Multiple regulators for Oil & Gas: Replication of Old Problems?

New Delhi, March 27, 2010

“Instead of creating a parallel regulatory body in the oil and gas sector, the government should strengthen the existing regulatory body, Petroleum and Natural Gas Regulatory Board (PNGRB) to enable the establishment of a sound regulatory environment in the sector” opines CUTS International, a premier economic policy research and advocacy group while reacting to the government’s proposal for creating a National Gas Highway Development Authority (NGHDA) for regulating transmission of gas, a function that the existing regulator (PNGRB) was expected to shoulder as per provisions of the PNGRB Act 2006.

“The PNGRB was constituted about two years ago to regulate the mid stream as well as down stream businesses in the oil and gas sectors. However, the government has not notified vital sections of the PNGRB Act as yet including Section 16 that empowers the board to issue authorisation to entities for laying natural gas pipelines” says Pradeep S Mehta, Secretary General of CUTS International and an eminent commentator on regulatory issues.

In a recent judgment by Delhi High Court, it was observed that PNGRB is not authorised to clear pipeline projects but can merely inspect them. Meanwhile, the Ministry of Petroleum and Natural Gas (Mo-PNG) allotted trunk gas pipelines to Reliance Gas Transportation Infrastructure Ltd. (RGTIL) and GAIL India without going though a proper bidding process. This reflects failure in making the regulatory processes transparent and impairs credibility of the existing regulatory agency in the sector.

The above incident exposes the toothless nature and lack of regulatory independence of the PNGRB and the government’s seeming accommodation of such aberrations in the functioning of regulators.

From all ominous indications such inefficiency may also afflict the proposed regulator whose establishment is in any case not prudent, given that a regulator (PNGRB) already exists in the oil and gas sector and that too without notification.

“The government should focus on empowering existing regulatory institutions, rather than merely creating new ones, to ensure that a transparent and credible regulatory environment emerges in such key sectors as oil and gas”, asserts Mehta.

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