Oil regulator cracks down on city gas firms; seeks uniform piped gas price

Business Standard

5 days ago

Oil sector regulator PNGRB has ordered city gas retailers to charge a uniform price for natural gas they pipe to household kitchens for cooking purposes, regardless of consumption levels, as it looks to curb the tendency of companies to charge a higher rate beyond a usage threshold.
The government allocates natural gas priced at lower than market rates, called APM gas, to city gas retailers for sale to households as piped natural gas (PNG). Since the allocation is made by the government at sub-market price, the expectation is that the city gas retailers will pass on the benefit to users.
While gas meant for household kitchens is priced at lower than market rates, the same supplied to commercial establishments, like hotels, is to be priced at the market rate.
The Petroleum and Natural Gas Regulatory Board (PNGRB) in a notice said it has come to light that "certain city gas distribution (CGD) entities are implementing a telescopic pricing structure for piped natural gas (PNG) domestic consumers, wherein the per SCM (Standard Cubic Meter) price of natural gas escalates as consumption surpasses a predefined threshold".
Such a practice, the PNGRB said, is incorrect.
"Such pricing practices may inadvertently facilitate the unauthorised use of subsidised administered price mechanism (APM) gas by commercial consumers, who may be misclassified as domestic consumers," the regulator said.
The regulator, however, did not name the CGD companies indulging in such practice.
PNGRB said APM gas is being supplied to CGD entities to fulfil the PNG (Domestic) and CNG (Transport) demand.
"This allocation is made at a concessional rate compared to market or spot LNG prices, with the objective of promoting the adoption of natural gas across domestic households and the transport sector." Telescopic pricing structure for PNG "may inadvertently facilitate the unauthorised use of subsidised APM gas by commercial consumers who may be misclassified as domestic consumers", it said.
"Additionally, genuine domestic consumers with higher consumption levels may be unfairly subjected to elevated charges, despite natural gas being supplied to CGD entities at a uniform APM rate," it added.
The regulator said that to uphold the principles of equity and transparency, CGD entities should undertake a thorough review of consumption patterns and investigate anomalous cases, where domestic consumers exhibit significantly higher usage relative to the industry average.
"Based on the findings, suitable corrective measures be instituted as per the regulations on the subject. PNG (Domestic kitchen usage) should be supplied at a uniform rate to all domestic household consumers, irrespective of their daily consumption levels," PNGRB added.
Just like piped natural gas, differential pricing exists even in LPG prices.
Households buy 14.2-kg cylinders at subsidised rates while commercial establishments, like hotels and restaurants, are to use market-priced 19-kg commercial LPG cylinders. But diversion of domestic LPG to commercial establishments has been a rampant practice.