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Rajkumar University of Petroleum & Energy Studies

Downstream
Refining
Storage Processing

Transportation
Distribution etc Note: Downstream does not include exploration and

production of crude oil and natural gas

Main Players
Indian Oil Corporation-Refining (40%) and

Distribution Hindustan Petroleum-Refining (15.9%)and Distribution Bharat Petroleum-Distribution and Refining (9%) Reliance Industries Limited-Refining (22%) and distribution ONGC Refining (6.7%) GAIL-Transportation

Transportation Infrastructure
Railway-43%
Pipeline-42% Tankers-11%

Road-4%

Issue
Lack of adequate transmission infrastructure

Petroleum and Natural Gas Regulatory Board Act 2006


Bill is tabled in 2002
Finally passed in 2006

Petroleum and Natural Gas Regulatory Board Act 2006


Main purpose of the act is to establish Petroleum and

Natural gas regulatory board to regulate the refining,

processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas;
To ensure proper supply of petroleum and petroleum

products across the country at fair prices Ensure the quality and security of supply and compliance with technical and safety standards The Act does not deal with E & P i.e., the production of Natural gas and crude oil

Petroleum and Natural Gas Regulatory Board


The board is constituted under petroleum and natural gas

regulatory board act 2006 Aim to regulate the downstream segment of the oil and gas industry consisting of refining, processing, storage, transportation, distribution, marketing, and the sale of petroleum, petroleum products and natural gas. Aims at regulating the operations of petroleum transmission and the distribution network Protect the interest of the consumers and entities. Act as a regulatory body for settling disputes between entities in downstream segment

BOARD
The central government shall appoint the chairperson

and other members of the board from amongst persons of eminence in the fields of petroleum and natural gas industry, management, finance, law administration or consumer affairs [Section 4 (1)]

Board
The Chairperson and Members of the Board shall be

selected on the recommendations of a Search Committee, headed by Member (Energy), Planning Commission. It is, therefore, expected that only persons of eminence and having due merit shall be appointed as Chairperson/Member of the Board.

Structure of the Board


Chairperson (Section 3 (3)
Member (Legal) Three other members (Commercial, Infrastructure

and Distribution) Secretary to act on behalf of the board

Chairperson
The chairperson shall have the powers of general

superintendence and directions in the conduct of the affairs of the board and also preside over the meetings.

Term of office
Five years or 65 years whichever is earlier [Section 5

(2)] Chairperson and other members not eligible for reappointment [Section 5 (2)]

Removal
Section 7 The central government may remove from office the

chairperson or any other member who, Adjudged as insolvent Convicted of an offence Physically or mentally incapable Acquired financial or other interest as is likely to affect prejudicially his functions Abused his position [Can be removed only after enquiry]

Adjudicate
Decide disputes arising between entities or between an

entity and any other person relating refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas except the parties have agreed for arbitration The board would be having powers like a civil court under the code of civil procedure 1908 while trying a suit Appeal lies to Appellate tribunal for electricity [Section 33] [Common tribunal for electricity, petroleum & Natural gas] Time period for appeal is 30 days [Section 33 (2)] Order of the board will be executed as decree

Complaint
A complaint may be filed before the board by any

person in respect of matters relating to entities or between entities on any matter arising out of the act Complaints by individual consumers maintainable before consumer protection act 1986 shall not be taken by the board. (Ref sections 12 and 25 (1), 56] Complaint has be to be filed within 60 days of the act If there is primefacie evidence in the case, it will be referred to the investigation officer [Section 25]

Appeal from tribunal


Appeal from the tribunal lies to supreme court

[Section 37] Time period for appeal is 90 days

Key Functions of the Board


Ensuring uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country To promote competitive markets
Protect consumer interest and foster fair trade and competition

Key Functions of the Board


REGISTRATION [Section 15] Entities to market notified petroleum and petroleum products and natural gas; To establish and operate LNG terminals and To establish storage facilities for petroleum, petroleum products and natural gas Register is maintained in the board office and open to public [Section 14 (3)] The board may after enquiry grant a certificate of

registration

Key Functions of the Board


AUTHORIZATION [Section 16(1) (2)] Entities to lay, build, operate or expand a or local natural gas distribution network or city gas distribution network should get authorization from the board. Entities who want to lay build operate or expand a common carrier or contract carrier Declare pipeline as common carrier or contract carrier

Key Functions of the Board


Fix transportation rates contract carrier

for common carrier or

Regulations
Was authorized to issue regulations

in activities relating to petroleum, petroleum products and natural gas including the construction and operation of pipeline and infrastructure projects related to downstream petroleum and natural gas sector [Section 11 (e)]

Petroleum and Natural Gas Regulatory board


On March-April 2009 the board issues the regulations

for City Gas Distribution Networks (CGD) for six cities and issued licenses Regulations were issued for transmission and distribution of natural gas. The regulations specify a transparent mechanism for selection of an entity for any particular city for the development of CGD network.

City Gas Distribution


Through authorization it invites bids and issue

licenses for city gas distribution network

Technical standard
Sections 11(j) & 61(2)(h) vest in PNGRB the function of

laying down technical standards & specifications as regulations

Transportation Tariff
This section vests power on PNGRB to lay down by

regulations the transportation tariffs for common carrier or contract carrier [Sections 22 & 61(2)(e)] Several factors will be taken in to consideration while deciding the tariff [Section 22(2)]

Suspension or Cancellation
If the entity failed to comply with the terms &

conditions, then after giving an opportunity to the entity may suspend or cancel the authorization given [Section 23]

Issue
Whether PNGRB is Independent?

Section 42 of the act vests power on the government to issue policy directives that shall bind PNGRB Indraprastha Gas Ltd (IGL) has challenged the PNGRB notification for bid in Ghaziabad stating section 16 has not so far notified by the Government, so PNGRB has no authorization.

Issue
Indraprastha Gas Ltd (IGL) and a non profit organization

voice of India has challenged the PNGRB notification for bid in Ghaziabad in Delhi High court stating section 16 has not so far notified by the Government, so PNGRB has no authorization to issue licenses for city gas distribution network. The PNGRB order of March 19, 2009, rejecting IGLs contention that it had authorization for Ghaziabad and the Board inviting bids for the city, is liable to be set aside on the sole ground that it violated the principles of natural justice.

DELHI HIGH COURT


In pursuance of the challenge by Indraprastha Gas Ltd

(IGL) the Delhi high court ruled on January 10, 2010 that the petroleum and natural gas regulatory board did not has power to issue city gas licenses The High court ruled since the government had not notified section 16 of the PNGRB act, the downstream regulator did not have powers to grant authorization for beginning city gas distribution The board was constituted in 2007 without section 16 of the act being notified.

DELHI HIGH COURT


The High Court judgment says In view of non

notification it is held that the board has no power to grant authorization to entities which applied to it for laying, building, operating or expanding city or local natural gas distribution networks.this is in consonance with the central governments stand in the counter affidavit filed before the court

DELHI HIGH COURT


The Delhi high court has held Any authorization

given by the board cannot be termed as a valid authorization as section 16 of the PNGRB act has not yet been notified by the government

SUPREME COURT
Against the order of the Delhi high court, PNGRB

preferred an special leave petition in the supreme court of India The supreme court has said the PNGRB board can only process pending applications, but it cannot process any final orders.

Government Notified
Section 16 of the act, which gives it PNGRB power to

grant licenses was notified by the government in July 2010. In its application, PNGRB has submitted that since the government has notified section 16 of the PNGRB Act, 2006, the regulator is now legally authorized to grant liccense. It has requested the court to modify its order.

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