What is the tone of the passage?

Directions: Answer the given question based on the following passage:
Should GAIL have monopoly over pipelines? Should a large country like India with a huge appetite for gas and diverse potential sources of supply have a single company owning and operating all the trunk pipelines, or would competition serve the public cause better?

A high investment infrastructure like gas transmission is and should be a monopoly, but in a somewhat narrow sense. The more appropriate question to ask is should we have a monopoly in gas pipelines rather than should GAIL have a monopoly. Gas transmission is essentially a natural monopoly and we are talking of fairly large stakes. The size of the business in India today is worth over half a billion dollars and in the next 4–5 years, with the kind of supply projections that are being predicted, this business could be worth a billion dollars. In a growing economy with significant backlog of investments in basic infrastructure, it is imperative for policy and decision makers to ensure that the principles and fundamentals of gas transmission are laid out properly. Issues such as open competition in gas transmission infrastructure, the advantages or disadvantages of allowing gas producers and marketers to build and operate this infrastructure and the nature of regulation that should be put in place to enable the development and growth of an efficient gas market are critical.

Like other high investment infrastructure, gas transmission is and should be a monopoly — but in a somewhat narrow sense. The business need not be owned and operated by a single agency in a vast country like India. We can encourage two or three players in the country from the private or public sector. As long as we have strong regulation — on service standards, technical standards, interconnectivity issues, pricing and investments — we are likely to get an optimal use of resources and satisfied users. Now why do we argue that multiple and parallel pipeline infrastructure is not desirable. The answer simply is that we should not use the scarce resources, be they public or private, in creating multiple assets when there is a need for resource optimization. The presence of multiple pipelines will undermine the economics of connectivity, even though a strong and efficient regulator could try to avoid it. There is of course a strong need to create mechanisms wherein the most efficient player can build and operate the pipelines. The competition should be at the conceptualization and planning stage so that the most efficient player is selected to build and operate the pipeline.

The next important issue is whether there is a conflict of interest in allowing gas producers/marketers to set up pipelines. Ideally, the supplier, transporter and distributor should be separate entities with each of them concentrating on their core areas of expertise. The supplier has to be an efficient gas producer (upstream player), the transporter should be one who is very good at managing inter–state and inter–country pipelines and the distributor should be one who understands the needs of the customers. A core transporter need not necessarily be a good distributor. India should evolve a mechanism where there are multiple producers supplying gas through a single trunk pipeline grid and having multiple distributors. Because we are at a fairly nascent stage today, the lack of a national grid should be seen as an advantage as it gives us the opportunity to plan our system well.

Strong regulation in the infrastructure sectors has always been a matter of serious debate in India. While we have made tremendous progress on the regulatory learning curve, there still are many unanswered questions and investor confidence is still nowhere near the desired level. The regulatory model for the gas transmission sector should take into account the interests of consumers on one hand and ensure the health of the industry on the other. The independence of the regulator is paramount. The funding for the regulator should come from all industry players. Tariff determination whether it is cost to serve, or any other model, should be aimed at ensuring efficient operation and development of capacity. It should also be ensured that the tariffs are equitable for customers and investors. The nature of the infrastructure and market for gas transmission implies a jurisdiction for the regulator that should cut across states and the country as a whole. This is primarily driven by the fact that regulating gas grids is a fairly complex issue and is best regulated by a single agency. Moreover, conflict of interest between Central and State entities could hamper speedy implementation of projects. A good regulator will ensure that there is non discriminatory access, transparency and third party access to gas infrastructure.

Question

Multiple choice

What is the tone of the passage?

Directions: Answer the given question based on the following passage:
Should GAIL have monopoly over pipelines? Should a large country like India with a huge appetite for gas and diverse potential sources of supply have a single company owning and operating all the trunk pipelines, or would competition serve the public cause better?

A high investment infrastructure like gas transmission is and should be a monopoly, but in a somewhat narrow sense. The more appropriate question to ask is should we have a monopoly in gas pipelines rather than should GAIL have a monopoly. Gas transmission is essentially a natural monopoly and we are talking of fairly large stakes. The size of the business in India today is worth over half a billion dollars and in the next 4–5 years, with the kind of supply projections that are being predicted, this business could be worth a billion dollars. In a growing economy with significant backlog of investments in basic infrastructure, it is imperative for policy and decision makers to ensure that the principles and fundamentals of gas transmission are laid out properly. Issues such as open competition in gas transmission infrastructure, the advantages or disadvantages of allowing gas producers and marketers to build and operate this infrastructure and the nature of regulation that should be put in place to enable the development and growth of an efficient gas market are critical.

Like other high investment infrastructure, gas transmission is and should be a monopoly — but in a somewhat narrow sense. The business need not be owned and operated by a single agency in a vast country like India. We can encourage two or three players in the country from the private or public sector. As long as we have strong regulation — on service standards, technical standards, interconnectivity issues, pricing and investments — we are likely to get an optimal use of resources and satisfied users. Now why do we argue that multiple and parallel pipeline infrastructure is not desirable. The answer simply is that we should not use the scarce resources, be they public or private, in creating multiple assets when there is a need for resource optimization. The presence of multiple pipelines will undermine the economics of connectivity, even though a strong and efficient regulator could try to avoid it. There is of course a strong need to create mechanisms wherein the most efficient player can build and operate the pipelines. The competition should be at the conceptualization and planning stage so that the most efficient player is selected to build and operate the pipeline.

The next important issue is whether there is a conflict of interest in allowing gas producers/marketers to set up pipelines. Ideally, the supplier, transporter and distributor should be separate entities with each of them concentrating on their core areas of expertise. The supplier has to be an efficient gas producer (upstream player), the transporter should be one who is very good at managing inter–state and inter–country pipelines and the distributor should be one who understands the needs of the customers. A core transporter need not necessarily be a good distributor. India should evolve a mechanism where there are multiple producers supplying gas through a single trunk pipeline grid and having multiple distributors. Because we are at a fairly nascent stage today, the lack of a national grid should be seen as an advantage as it gives us the opportunity to plan our system well.

Strong regulation in the infrastructure sectors has always been a matter of serious debate in India. While we have made tremendous progress on the regulatory learning curve, there still are many unanswered questions and investor confidence is still nowhere near the desired level. The regulatory model for the gas transmission sector should take into account the interests of consumers on one hand and ensure the health of the industry on the other. The independence of the regulator is paramount. The funding for the regulator should come from all industry players. Tariff determination whether it is cost to serve, or any other model, should be aimed at ensuring efficient operation and development of capacity. It should also be ensured that the tariffs are equitable for customers and investors. The nature of the infrastructure and market for gas transmission implies a jurisdiction for the regulator that should cut across states and the country as a whole. This is primarily driven by the fact that regulating gas grids is a fairly complex issue and is best regulated by a single agency. Moreover, conflict of interest between Central and State entities could hamper speedy implementation of projects. A good regulator will ensure that there is non discriminatory access, transparency and third party access to gas infrastructure.

Critical
Subjective
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Analytical

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