The Petroleum and Natural Gas Regulatory Board (PNGRB) has issued draft regulations for operating gas exchanges in the country. It has sought views and comments from the stakeholders on the draft regulations till August 10, 2020. These regulations will be finalised by August 17, 2020. The draft lays out in detail the regulations regarding the setting up and operation of an exchange, membership, shareholding and settlement of trades. It relies on the Petroleum and Natural Gas Regulatory Board (Access Code for Common Carrier or Contract Carrier Natural Gas Pipelines) Regulations, 2008 for controlling the gas grid and exchanges whereas National Gas Grid Management System will handle the gas nomination and its scheduling during trade.
As per the draft rules, participants at the gas exchange should have gas transport agreements (GTAs) with transporters. The termination date for such a GTA should be minimum 15 days from the date when the transaction is executed at the gas exchange. The transportation tariff, if any, will be as determined or authorised by PNGRB and all contracts are necessarily for physical delivery. Further, every authorised gas exchange or clearing corporation will have a minimum net worth of Rs 250 million at all times, as per the draft.
PNGRB has also proposed to cap the equity shares that entities can hold in the gas exchange. As per the draft rules, no shareholder can have more than 15 per cent stake in a natural gas exchange. Besides, anybody wanting to set up an exchange would require an approval from the PNGRB, which would have the power to regulate an exchange, call for information, order investigation and cancel authorisation if needed. For a member of the exchange, the shareholding has been restricted to 5 per cent of the equity share capital while the aggregate shareholding has been capped at 49 per cent for all members. At least 51 per cent equity capital of an authorised clearing corporation shall always be held by one or more gas exchanges, as per the draft. But no clearing corporation can hold any stake or interest of any nature in the gas exchange. Further, the draft also lays down rules on the number of independent directors, which cannot be less than the number of shareholder directors on the board of the gas exchange and the clearing corporation. The draft asks every clearing corporation or gas exchange to establish and maintain a settlement fund for each category of product authorized by the regulator to guarantee the settlement of trades executed.