IOC opposes PNGRB’s move to declare its pipelines common carriers

Indian Oil Corp. Ltd. (IOC), India’s largest state-owned oil company, has opposed a move by the Petroleum and Natural Gas Regulatory Board (PNGRB) to declare 20 of its petroleum product pipelines as common carriers. These pipelines, which account for nearly half of the company’s pipeline capacity of 80 million tonnes, have a combined capacity to move 38.59 million tonnes of products annually. They include Barauni-Kanpur, Koyali-Ahmedabad, Mathura-Delhi, Panipat-Ambala-Jalandhar, Chennai-Bangalore, Haldia-Barauni and Guwahati-Siliguri.

If successful, third parties, such as privately owned Essar Oil and Reliance Industries, can get access to these pipelines, which would enable them to move their products on the 5,900-kilometer network.

“IOC’s pipelines are not being used for supply of petroleum and petroleum products to any consumer,” the PNGRB said. The pipelines originate from IOC’s refineries and terminate at the company’s depots. “These pipelines merely serve as a mode of evacuation and of stock transfer.”

IOC said petroleum product pipelines are not natural monopolies as alternative modes of transport such as rail or road transport also exist.

“It is not a case of natural gas pipelines where there is a natural monopoly as natural gas cannot be transported on land by any other modes,” IOC said.

“Hence the basic criterion for bringing in competition for petroleum product pipelines is totally different, and as per that market dynamics, competition already exists in the market,” the company said.

IOC said its pipelines are not “common carrier” under the PNGRB Act of 2006 and the regulator’s authority with respect to those pipelines are not covered within the definition of common carrier and is therefore limited.

IOC argued that a pipeline can de declared a common carrier only when there is more than one consumer. It says its pipelines cater exclusively to its own logistic requirements.