IGL row: Why gas stocks are market winners today

The Delhi High Court has ruled in favour of city gas utility Indraprastha Gas, or IGL, which was contesting a directive from a government regulator to cut gas tariffs in New Delhi, television channels reported on Friday.

Shares in Indraprastha Gas surged more than 38 percent after the news. Stocks of other gas utilities, including Gujarat Gas and Petronet LNG rose between 10-18 percent

[caption id=“attachment_329346” align=“alignleft” width=“380” caption=“IGL had challenged the constitutionality and legality of the powers of the Petroleum and Natural Gas Regulatory Board (PNGRB) to fix the tariff. Reuters”]  [/caption]

IGL had challenged the constitutionality and legality of the powers of the Petroleum and Natural Gas Regulatory Board (PNGRB) to fix the tariff. IGL had approached the high court after the regulator, in an order dated April 9, 2012, asked IGL to cut down its network tariff by 63 percent, as reported. In a retrospective decision, it also asked the company to refund the difference to its customers for the period from April 1, 2008, until the date of issuance of the order.

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This is the first time the regulator has determined tariff for any city gas distribution player.

“The order dated April 9, 2012 to the extent of fixing the maximum retail price or requiring the petitioner (IGL) to disclose the network tariff and the compression charges to its consumers is struck down/quashed,” the court ruled.

The division bench made it clear that the regulatory board was not empowered to fix any component of ’network tariff’ and ‘compression charges’ for compressed natural gas as contended by the IGL.

“We further hold that the board is also not empowered to fix any component of network tariff or compression charge for an entity such as the petitioner (IGL), having its own distribution network. The provision of the regulations, so far as construed by the board to be so empowering it, is held to be bad/illegal,” court said.

Agencies