Indraprastha Gas Ltd (IGL) on Wednesday rose as much as 16.5%, its sharpest gain in three years, after the Supreme Court of India ruled that Petroleum and Natural Gas Regulatory Board (PNGRB) cannot set IGL’s network tariffs.
The Supreme Court ruled that the regulator has no power to set retail gas price, according to Bloomberg report.
In April 2012, PNGRB, which regulates downstream transport tariffs for oil and gas, directed IGL to reimburse prices to its retail consumers with retrospective effect of five years. IGL was directed to return almost 60% of the tariffs charged in the previous five years. IGL challenged the order in the Delhi High Court, which accepted IGL’s contention.
In 2014, PNGRB challenged the Delhi High Court order in the Supreme Court, saying while it has no power to control the final retail price, it has complete jurisdiction on fixing network tariffs of companies. However, IGL claimed that PNGRB cannot control network tariffs of companies which are present in the entire value chain of supply and distribution, such as IGL. The Delhi government and the central government supported IGL on the issue.
“Today’s verdict upholds IGL’s stand indicating that PNGRB has no jurisdiction and paves way for further capex and expansion of market for IGL. It’s a big positive for IGL, although it was expected for a long time,” said an analyst with a domestic brokerage.
Shares of Gail (India) Ltd gained as much as 2.3% to `401 while Petronet LNG Ltd gained as much as 5.4% to `197.05 and Gujarat State Petronet Ltd rose 6.2% to `126.30.
IGL, which began operations in 1998, is jointly promoted by state-owned Gail (India) Ltd and Bharat Petroleum Corp. Ltd (BPCL), which together own 45% of the company.
The cost of gas sold to consumers through a city gas distribution network has four main components:
1. Cost of gas,
2. Compression charge,
3. Network tariff and
4. Marketing margin.
The Good News is: After Wednesday’s verdict, any company which sets up its own network and supplies gas to its own distribution centers, will be allowed to fix network tariffs too, apart from the price of the other three components mentioned above.
Although there is a threat that the company involved could increase the price of Gas… there is also possibility for new companies to come in and establish themselves, thus lowering the overall existing prices. The opportunities in Gas generation is exponential or phenomenal. The fact that CNG GAS can be created out of garbage or Human/Animal shit makes it SHIT cheap or garbage cheap. Well there is absolutely nothing that is priced below the cost of garbage or shit. Now combine it with the fact that millions in India are housing-displaced and have to defecate in the open. Railway Tracks are regularly used by people staying in the slum to defaecate around Cities. Combine both the 3 problems:
1. Free availability of Raw Material – Garbage or Poo
2. Open defecation by people
3. Sanitation & Hygenic Disaster
Simple Solution: Make toilets for them (1. Social service) which will be able to channel the poo to a nearby (within 1Km diameter) biogas digester that will generate Gas & electricity (2. profit) and high quality organic fertilizer by way of Treated Sewage Effluent. which can be used to water the fruit bearing trees, & landscape using local storage tank and drip irrigation (3. higher agriculture output). This will lead to greater greenery, health, hygiene and sanitation.