OREANDA-NEWS. August 29, 2011. State-run energy firms have stalled plans of private rivals for city gas distribution (CGD) alleging that some companies have suppressed input costs and bid aggressively to bag projects in the third round of bidding for licences to supply natural gas to households and automobiles.

Indian Oil Corp (IOC), GAIL India and Indraprastha Gas (IGL), which have enjoyed a monopolistic hold in their markets, are facing fierce competition from Indian and foreign firms such as Britain’s BG group and the Adani Group, and have formally approached the Petroleum and Natural Gas Regulatory Board (PNGRB) alleging foul play in bids submitted by rivals.

“We have not been able to complete the third round of CGD auctions as yet because IOC, GAIL and IGL have notified us about certain financial irregularities in the technical bids submitted by other companies where inputs costs have been unduly deflated in order to be competitive. They have also said that the feasibility reports submitted by some companies contain some impractical elements that are not economically viable, so we are looking into the matter currently,” L Mansingh, chairman, Petroleum and Natural Gas Regulatory Board, told ET. “IOC, GAIL and IGL have alleged that some companies have deliberately suppressed key input costs like steel to keep their overall capital costs competitive,” Mansingh said.

The regulatory board wants to expand the use of the clean fuel to 300 cities and has invited bids for licences that would take India’s gas network far beyond the current concentration in large cities such as New Delhi and Mumbai, apart from towns in the Gujarat state that account for a third of India’s natural gas consumption.

But GAIL wants to set up gas networks in 200 cities. “The details of these cities have already been forwarded to the ministry of petroleum and natural gas by GAIL with a request for authorisation for the setting-up of CGD network in these cities,” GAIL said in its website. GAIL has also challenged the award of pipeline projects to other companies. The allegations of staterun companies have also upset the regulatory board’s plans to call for the next round of bids.

In the previous round that concluded last February, bids were invited for installing and running a CGD network in Asansol-Durgapur in West Bengal; Bhavnagar, Gandhidham-Anjar, Bhuj-Mundra and Jamnagar in Gujarat; Ludhiana and Jalandhar in Punjab; and Panipat in Haryana. The round attracted 51 bids from 26 companies, including IOC, Adani Energy, Gujarat State Petroleum Corp, Engineers India, GAIL Gas, British Gas and IGL.

Mansingh also said that the matter needs to be decided by the PNGRB board, “but given the ongoing litigation, we need some more time and may have to wait till the board is re-constituted”. In August, two members of the PNGRB have moved the Supreme Court against Mansingh, alleging “lack of transparency” on his part in giving licences for CGD network and tariff fixation.

PNGRB members YPC Dangay and Sudha Mahalingam have approached the Supreme Court against the “arbitrary functioning” of Mansingh and raised questions over the manner in which the regulator is functioning.