Amendments to the Law on Natural Gas MarketMore results
Law No. 6353 introduced amendments to several laws and decree laws, including Law No. 4646 on the Natural Gas Market, adopted in 2001. Article 23 of Law No. 6353 put forward changes not only to the details of the privatisation process for Baskent Natural Gas Distribution Company (Baskent Gaz), which operates in Ankara, but also to the fees for gas transport.
- Type of Law
- Capturing a market, an industry or public resources
Description of the law
Law No. 6353 introduced amendments to several laws and decree laws, including Law No. 4646 on the Natural Gas Market, adopted in 2001.
Article 23 of Law No. 6353 put forward changes not only to the details of the privatisation process for Baskent Natural Gas Distribution Company (Baskent Gaz), which operates in Ankara, but also to the fees for gas transport. Previously, the privatisation of Baskent Gaz shares had involved separate tenders for the public’s 80 per cent shareholding and Ankara Metropolitan Municipality’s 20 per cent shareholding, but neither of the processes ended in success (see here). The new amendment enabled the inclusion of the municipality’s 20 per cent shareholding in a new privatisation programme for the public’s 80 per cent shareholding so that 100 per cent of the shares could be privatised in a single tender process undertaken by the Directorate of Privatisation Administration.
Based on Article 23, the revenues generated by the privatisation would be used to cover all the debts owed by the municipality and the General Directorate of EGO to the General Directorate of BOTAS and the state treasury. The same article also increased the natural gas transport fee payable to Baskent Gaz from US$0.055 to US$0.077 per cubic metre before the tender process in 2013. This pricing was set to remain in effect for eight years (see also here and here).
During the parliamentary hearing, the period of eight years for the transport fee was criticised by opposition MPs. For instance, Levent Gok of the Republican People’s Party (CHP) argued that the law puts Ankara at the mercy of the company that would get the authority to determine the gas tariff after eight years. He further stated that Ankara consumes more expensive gas than other cities, and posited that with the amendment the residents of Ankara were likely to suffer more from any potential increase in gas transport fees after eight years. (See the parliamentary discussion here.) It was also asserted that the main reason behind the amendment to press forward with privatisation of Baskent Gaz was simply to cover all of Ankara Metropolitan Municipality’s debts to BOTAS and the state treasury (see here).
On 26 January 2013, the tender process to privatise Baskent Gaz was completed and a Torunlar Food subsidiary, Torunlar Energy, won the bid for Turkey’s second largest natural gas grid, with an offer of US$1.162 billion. The new company will operate Baskent Gaz for 24 years (see also here). However, the tender process shows signs of being tailor-made. Even though the 2008 tender for 80 per cent of the company received an offer of US$1.6 billion, the bid from Torunlar Energy was only US$1.162 billion, which is far less than the earlier offer. Some also drew attention to the owner of Torunlar Food, Aziz Torun, who is a friend of Recep Tayyip Erdoğan from Imam Hatip High School. It is claimed that Torun, because of his close relationship with Erdoğan, has been given several privileges during the AKP’s years in government (see here, here and here).
Full Law Name
Law No. 6353 amending several laws and decree laws (Official Gazette No. 28351)
Type of law
Act of Parliament, amendment
Scope of application
Substantive: privatisation of Baskent Gaz and new gas transport fees
Temporal: eight years for new gas transport fee
Time of adoption and entering to force
Date of adoption: 4 July 2012
Date of entry into force: 12 July 2012 (published in the Official Gazette)
Who drafted it
Justice and Development Party
Who submitted it to Parliament or to another collective body
Justice and Development Party
Relevant developments in the process of adoption that show signs it’s tailor-made
During discussions in the Planning and Budget Committee, opposition MPs argued that despite their persistent requests to send the proposal to the relevant subcommittees to debate the details, it was not referred to any of the relevant subcommittees (see page 44). In their counter-statement, opposition MPs argued that there had initially been 39 articles concerning 35 different laws on the committee’s agenda and many of them did not need to be discussed in the Planning and Budget Committee. However, an additional 59 articles were inserted during discussions and the proposals were prepared without the involvement of any relevant stakeholders outside of Parliament. Consequently, policy-making was described as a rushed and irregular process.
Opposition MPs also underlined that the debts owed by Ankara Metropolitan Municipality and its subsidiaries to the state treasury and BOTAS were frozen and the outstanding payments had been covered up for five years, whereas other municipalities indebted to the state had been followed up (see page 45). They argued that it was not acceptable to make such an amendment to pave the way for the privatisation of Baskent Gaz in order to cover all the debts of Ankara Metropolitan Municipality to BOTAS and the state treasury (see here).
Who adopted it
Initiatives to challenge it and their outcomes
No objections were raised to challenge the law, but the tender result was challenged by CHP. First, MP Levent Gok and other CHP MPs submitted a request for a parliamentary inquiry to investigate the privatisation process for Baskent Gaz. Their request was rejected by Parliament in February 2013 (see here).
Second, MP Levent Gok submitted another request for a motion of censure against Recent Tayyip Erdoğan over the privatisation of Baskent Gaz, asserting that Erdoğan had caused both the people and the public authority to suffer damage by approving the tender. However, the motion was not accepted.
Energy & natural resources
Direct beneficiaries and related networks
Torunlar Energy as a subsidiary of Torunlar Food
Ankara Metropolitan Municipality
The privatisation of 100 per cent of the shares in Baskent Gaz, which is the second largest natural gas distributor in Turkey, has serious socioeconomic consequences. First, with the privatisation, Ankara Metropolitan Municipality is deprived of a very significant source of revenue, which undermines its capacity to provide services to the residents of Ankara. Second, public control over the natural gas price is completely eliminated as there is no representative of the municipality left in the company’s management. The third impact, which is related to the second one, is that consumers in Ankara will be severely affected by the pricing policy of the new company as it now has a monopoly over gas distribution in the city (see here and here).
Impact on rule of law
The amendment to the law was specifically designed to benefit Ankara Metropolitan Municipality so as to cover all of its debts to BOTAS and the state treasury (see here). Despite the fact that there were requests from opposition MPs to send the proposal to the relevant subcommittees to discuss its details, it was not sent to any other subcommittee (see page 44). In addition, the proposals were formulated without input from any concerned stakeholders outside of Parliament. As a result, the policy-making process has been described as rushed and irregular (see here).
Despite an explicit provision in Article 4 of the Natural Gas Market Law, the new law revoked the municipality’s representative on the management and supervisory board of Baskent Gaz. According to Article 4, the in-city distribution company, which has a distribution license from the board, must offer a 10 per cent partnership share to the municipality where it is authorised. If the municipality or a municipal company acquires no shares or acquires shares at a rate not high enough to appoint at least one board member, the authority is entitled to request the in-city distribution company to arrange the necessary regulations to enable the municipality to be represented on the management and supervisory board in accordance with Article 275 of the Turkish Commercial Code No. 6762. However, the amendment under discussion specifically eliminated the application of Article 4 of the Natural Gas Market Law in the privatisation of Baskent Gaz. This surely impacts the municipality’s capacity to protect the rights and interests of the residents of Ankara.
Mayor of Ankara Metropolitan Municipality Mansur Yavaş filed a lawsuit to overturn the law, arguing that it is against the principle of equality in the Constitution. The principle of “equality before the law”, which is stipulated in Article 10 of the Constitution of the Republic of Turkey, applies to those whose legal status is the same. The purpose of the principle of equality is to ensure that individuals in the same situation adhere to the same process before the law in order to prevent discrimination and privilege. However, in the case of Ankara, the new law constitutes a violation of the principle of equality and modifies and distorts the law to serve the interests of a few (see also here).
Is there any corruption case that is linked to the tailor-made law?
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