The Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed a new framework for determination of tariffs for pipelines carrying gas to users. It also recommended charging city gas entities selling CNG and piped cooking gas to households at the lowest rates in order to bring investments and increase gas consumption.
The regulator floated a public consultation document for changing the zonal tariffs levied on pipelines that carry natural gas from fields producing it or from import ports, to users such as power plants, fertiliser units, or city gas entities.
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“The proposed changes are progressive and make delivered domestic gas costs for CGDs nearly uniform. However, as overall transmission costs are low versus gas costs, the impact is small. CGDs in the hinterland, such as IGL, will benefit. They will be largely neutral for MGL and marginally positive for GAIL,” said Kotak Institutional Equities. The firm noted that as unified tariffs are already in place across the national gas grid, and as the pipeline tariffs are a small part of the overall gas costs for end-customers, the impact is relatively small.
“For IGL, we estimate an overall benefit of Rs 42/mmbtu (US$0.5/mmbtu), with EBITDA benefit of Rs 1.6/scm. This will bring some respite for IGL, which has struggled to raise price in Delhi NCT. For MGL, the impact will be minimal,” the brokerage said.
PNGRB is responsible for regulating the transmission tariffs for natural gas pipelines which are fixed to provide a 12% normative return on capital employed. The tariffs were allocated along the length of the pipeline which increased further with the growing distance from the gas source, resulting in higher tariffs for consumers located at a farther distance.
“A public consultation document has been webhosted for seeking comments from stakeholders on various aspects of tariff regulations like reducing the unified tariff zones to two from three, levying zone one unified tariff to all the CNG and piped natural gas (PNG)-domestic customers,” the regulator said.
In November 2020, a unified tariff for all consumers connected to the natural gas grid was proposed which was later implemented from April 1, 2023.
PNGRB divided the entire length of a pipeline carrying natural gas into three zones – up to 300 km,
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