The Petroleum and Natural Gas Regulatory Board (PNGRB) is set to open city gas distribution (CGD) networks across the country to competition, allowing participation of more than one player in a circle. The PNGRB has finalised regulations on allowing competition in CGD areas that will be notified soon. Under the bids invited for various CGD rounds, the winner entities are given exclusivity over development of infrastructure and building the consumer base for a period of three to five years. Competition is expected to first impact Delhi and Mumbai, where Indraprastha Gas Limited and Mahanagar Gas Limited operate. Other CGD players that could face the heat of competition are Gujarat Gas and Adani Gas. Moreover, there are number of CGD areas where the exclusivity period has already ended. However, they continue to have exclusivity on infrastructure for 20 years with further extensions in a block of 10 years.

According to a report by ICICI Securities based on a webinar of equity investors and analysts with the PNGRB, the existing players will have to provide at least 20 per cent of their capacity to the new players. They might have to offer more depending upon the availability of spare capacity. The data on the spare capacity on the networks of all the city gas players may be made public at some stage in the future by the PNGRB, as per the report. The PNGRB has proposed the incumbent to calculate the tariff to be charged from new entrants to use their network and infrastructure, based on the guidelines for such computations. They would be required to display calculation of the tariff on their website, which can be contested by the new operators if the existing operators fail to adhere to the guidelines.

This decision is expected to end the monopoly of such operators as customers will get to pick the natural gas supplier of their choice. This is expected to further lower the gas bills for customers. Additionally, the increased competition is also expected to force the incumbents to lower their tariffs.