Petroleum and Natural Gas Regulatory Board (PNGRB) Act

Section 3 of The Petroleum and Natural Gas Regulatory Board Act of 2006 established the Petroleum and Natural Gas Regulatory Board (PNGRB).

The Act calls for the establishment of the Petroleum and Natural Gas Regulatory Board to safeguard the interests of consumers and organisations engaged in specific activities involving natural gas, petroleum products, and other forms of energy to foster competitive markets and address issues that are related to or incidental to those activities.

The Act requires the Board to regulate the refining, distribution, processing, marketing, transportation, storage, and sale of petroleum, petroleum products, and natural gas, but not the production of natural gas or crude oil. This measure is essential to guarantee a continuous and sufficient supply of these commodities throughout India.

The vision of the PNGRB is to facilitate the flow of investments into the essential infrastructure for the cost-effective transportation and distribution of petroleum, petroleum products, and natural gas and aims to protect consumer interests through fair trade practices. The PNGRB promotes competition among the entities to ensure improved competitiveness of the Indian economy and customer satisfaction.

Objectives of the PNGRB Act

The primary objectives of The PNGRB Act of 2006 are as follows:

• Safeguard the interests of consumers when buying or selling petroleum and its byproducts, as well as natural gas.
• To control crude oil and natural gas production and navigate the storage, processing, distribution, marketing, and sale of petroleum, petroleum products, and natural gas.
• Encouraging commercial competition between different corporations.
• Ensure a sufficient and ongoing supply of natural gas, petroleum, and byproducts throughout the nation.

Composition of the PNGRB

The Central Government appoints three authorities to the PNGRB as follows:

• Chairperson
• A Legal Member
• Three other members

The term of office of these individuals is for 5 years or until they turn 65. All appointees must be well-versed in management, finance, law, administration, consumer affairs, petroleum, and natural gas business. The salaries and allowances payable to all the authorities mentioned shall be as the Board prescribes. This is provided for in Section 5 of the Act.

As per Section 4 of The PNGRB Act of 2006, the legal member must be competent to serve as a judge in the High Court or have been a member of the Indian Legal Service and have held a grade 1 post in that service for 3 years.

The Central Government constitutes a search committee to select the Chairperson and the panel of persons to be considered for appointment as the technical members of the Appellate Tribunal. The Chairperson supervises the conduct of the board. He/she presides over the Board’s meetings and can carry out any other duties delegated to him. Additionally, a secretary is appointed by the Central Government. A Deputy Adviser and a Bench Officer assist the Secretary.

Six categories of offices function under the Secretary as follows:

• The Head-Authorization Joint Adviser, under whom two other Deputy Advisors are appointed. He/she has the power to authorise pipelines and City Gas Distribution infrastructure. He/she makes declarations regarding common or contact carriers. He.she also makes decisions regarding access to pipelines and gas networks. Additionally, he/she oversees the registration of various entities in the business.
• The Head-Monitoring Joint Advisor, under whom a Joint Advisor and a Deputy Director are appointed. The primary function of this authority is to monitor the enforcement of the City Gas Distribution system. He/she ensures post-authorisation compliance by entities. He/she is also responsible for the process of complaint management.
• The Head-Admin and IT Joint Adviser, under whom an IT Deputy Adviser is appointed. The functions of this authority include – personnel management, overseeing the administration, being an active part of board meetings, IT and website management, and issuing notifications regarding regulations.
• The Head-Finance and Commercial Joint Adviser appoints two Deputy Advisers and one Assistant Adviser. The functions of this officer include deciding internal finance-related issues, levying fees, preparation of annual accounts, levying tariffs, and monitoring transportation rates.
• The Head-Technical Joint Adviser appoints the two Deputy Directors. He/she is responsible for ensuring technical safety standards. He/she oversees capacity determination and the integrity management system.
• The Legal Cell is the primary function of adjudicating disputes and complaints. The cell monitors all legal matters relating to the subject and presides over court cases.

Functions of the PNGRB

Section 11 of the Act details the various functions of the Board as follows:

• Protection of consumer interests by encouraging fair commerce and rivalry among businesses.
• Registration of businesses selling natural gas and petroleum products. The companies are also subject to Central Government contracts.
• Differentiating between contract or standard carrier pipelines.
• Regulating access to common or contract carriers, defining the pipeline access code, and ensuring fair trade and competition among parties.
• Registration of organisations that build and run liquid petroleum gas terminals.
• Registration of organisations that set up storage facilities for natural gas, petroleum, and its byproducts and to check if they exceed the legal limit.

• To acquire permission from entities to construct, run, or expand:

  a. A common or contracted carrier

  b. Local or city natural gas distribution system

• Ensuring an adequate supply of natural gas, petroleum, and petroleum products.
• Ensuring that information about non-negotiable maximum retail pricing is displayed at outlets that sell petrol, natural gas, and petroleum products.
• Keeping an eye on prices and enforcing corrective methods to prevent restrictions on trade practices.
• Controlling the costs of transportation for common or contract carriers.
• Regulating access to the city or local natural gas distribution networks to guarantee fair commerce and competition among rivals in accordance with pipeline access codes.
• Maintaining a database with data about natural gas, petroleum, and related information.
• Establishing by law the standards of construction and operation of pipelines, infrastructure, and other criteria for activities involving petroleum, petroleum products, and natural gas.
• Ensuring petroleum and petroleum products are distributed equally.
• Keeping track of transportation fees, assessing fees, and other charges in accordance with the law.
• Performing additional functions designated by the Central Government to achieve the goals of the Act.

Powers of the PNGRB

The PNGRB is granted specific powers under Section 12 of The PNGRB Act, 2006 to handle complaints and settle disagreements between entities. The Board has all the powers vested with a Civil Court as per the Code of Civil Procedures.

The Board must also follow the principles of natural justice while deciding matters. The Board has the following powers:

• The Board has the jurisdiction to adjudicate upon and resolve any disagreement or disputes between entities.
• The Board may make any ruling, give any instructions, or refer the situation for further examination as it sees fit.
• When the Board receives a complaint from a third party regarding contravention of retail service obligations, marketing service obligations, or display of retail price at retail outlets, it has the authority to look into it.

Offences and Punishment under the PNGRB Act

The provisions of the Act’s Chapter IX deal with offences and punishments and are listed as follows:

Section 44 – A fine of Rs 25 crores is imposed on people violating any of the orders of the Board, and if the violation is repeated, a further penalty of Rs 10 lakhs is levied each day that such violation continues.

• Section 45 – If someone willfully disregards the orders of the Appellate Tribunal, they are subject to a fine of Rs one crore and a potential increase to Rs 2 crore rupees for each additional day the violation persists.
• Section 46 – An organisation that advertises any unregistered or unauthorised petroleum, petroleum products, or natural gas faces a maximum sentence of 3 years in prison, a fine of up to 25 crores, or both. If such marketing continues, an additional sum of Rs 10 lakhs per day is levied.
• Section 47 – If someone builds or runs an unregistered liquefied natural gas terminal, they would be penalised with up to 3 years in prison, a fine of Rs 25 crores, or both. If they continue to operate the terminal, they will also be fined an extra Rs. 10 lakhs per day.
• Section 48 – Building unauthorised common carriers, contract carriers, city or local natural gas distribution networks, as well as their laying, operating, or expansion, are all punishable by a maximum of a 3-year sentence in prison, a fine of Rs 25 crores, or both. If the case of continuance of the offence, an additional fine of Rs. 10 lakhs per day is applicable.
• Section 49 – Any pipeline, city, or local natural gas network, common carrier, or contract carrier that is willfully damaged, removed, or destroyed may result in a maximum 3-year prison sentence, a fine of Rs. 25 crores, or both. An additional fine of Rs. 10 lakhs per day may also be imposed if the violation continues.
• Section 50 – In cases in which a company violates the law, the person in charge is held vicariously liable for the violation. In such a circumstance, the doctrine of lifting the veil is applied to the entity.

Conclusion

The objective of The PNGRB Act is to establish a Regulatory Board and assist and enable it to dispense its functions effectively. Such a regulatory board coming into existence paved the way for various other enactments to be put forth for regulating the oil business.

The government issues exploration licences and mining leases. The Petroleum and Natural Gas Rules, of 1959, 2002, and 2009 were passed to govern such issuance. Another set of rules that existed was The Petroleum Amendment Rules of 2011.

This Act facilitated superior regulation of the production, refining, and exploration of petroleum products. Thus, the PNGRB Act and, eventually the PNGRB Board became essential legislation for ensuring the appropriate functioning of the petroleum and natural gas industry.