PNGRB proposes unified tariff for 12 gas pipelines not connected to national grid

New Delhi: Gas pipelines that are not physically linked to the national gas grid could soon be billed under the same unified tariff as the grid itself, according to a draft amendment the Petroleum and Natural Gas Regulatory Board (PNGRB) released on October 8. The draft names 12 such pipelines and regional networks.

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GAIL (India) Ltd runs five of them and Indian Oil Corporation Ltd (IOCL) three. The rest belong to Assam Gas Company Ltd, Gas Transmission India Pvt Ltd, IMC Ltd and Hooghly Pipelines Pvt Ltd. If the change goes through, companies moving gas on these lines would pay the common zonal rate that applies across the grid. At present, they pay each pipeline’s own approved tariff.

A place on the grid without a physical link

The regulations currently treat a pipeline as part of the national gas grid only if it belongs to a “network of all such natural gas pipelines within India which are fully interconnected with each other.” In other words, the gas has to be able to flow from one line into the next.

The draft keeps that rule but opens a second door. For unified tariff purposes, the grid would also take in pipelines “not interconnected with the pipelines referred to in clause (i) above, and/ or with each other, but are specifically enlisted in Schedule C1 to these regulations.” Put simply, a pipeline would no longer need a physical connection to count as part of the grid. Being named on a new list kept by the regulator, called Schedule C1, would be enough.

The list would not be fixed. According to the draft, “The Board may, by order, amend the said Schedule C or Schedule C1 from time to time.” Pipelines still under construction are covered as well. “The pipelines that are yet to be commissioned shall be part of the NGGS from the date of commissioning (fully or partly),” the draft said. NGGS stands for the National Gas Grid System. A listed pipeline would therefore move onto the common tariff as soon as any part of it starts operating.

The 12 pipelines on the list

Most of GAIL’s entries are regional networks that grew around local gas fields. The Cauvery Basin network in Tamil Nadu is on the list, along with its Narimanam-Kuthalam and Ramnad sub-networks. So is the Gujarat regional network, with six sub-networks: Motwan, ex-Hazira, Kalol-Ramol, Kadi-Kalol, Paliyad and Mehsana. GAIL’s Agartala regional network, its Kochi-Koottanad-Bangalore-Mangalore line and its Gurdaspur-Jammu pipeline complete its five entries.

Indian Oil’s three entries are the Ennore-Tuticorin, Kochi-Kanyakumari-Thoothukudi and Hazaribagh-Ranchi pipelines. Assam Gas Company’s Assam natural gas pipeline network is on the list too. Gas Transmission India’s Ennore-Nellore line, IMC’s Kakinada-Vijayawada-Nellore line and Hooghly Pipelines’ Kanai-Chhata-Panitar line make up the rest.

What it means for the common tariff

The draft retained the existing formula for the unified tariff. “Unified tariff shall be the weighted average of approved zonal tariffs in respect of all the pipelines forming part of the national gas grid system,” it said. Every pipeline in the grid has its own approved tariff. The unified tariff is the average of all those tariffs, with each pipeline weighted by how much gas it is expected to carry. The current unified natural gas pipeline tariff in India, notified by the PNGRB is Rs 54.00 per MMBTU for Zone 1 and Rs 110.02 per MMBTU for Zone 2.

Adding 12 pipelines to that pool would feed their tariffs and volumes into the common rate that every grid user pays. Which way the rate moves would depend on what these pipelines charge and how much gas they carry.

The pipeline companies themselves are not meant to gain or lose. Under the regulations, “the entities shall remain revenue neutral.” Each company would still be entitled to the revenue its own approved tariff would have earned on the gas it actually moved. The draft extends the existing settlement mechanism to cover the newly listed pipelines. Under that mechanism, companies that collect more than their entitlement under the common rate pass the surplus to those that collect less. The listed pipelines would also join the industry committee that runs this settlement, and they would file the same six-monthly, auditor-certified data as the rest of the grid.

A route for swapped government gas

The draft also adds a new provision for gas allocated by the government. “Provided that only for government allocated natural gas being supplied through swapping mechanism, the unified contractual path may consist of pipelines that are not interconnected,” it said.

The unified contractual path is the route on paper between the point where a company’s gas enters the grid and the point where it leaves. Under a swap, gas fed in at one place is drawn out at another, without the same gas physically travelling the whole way. The new provision would let such a route, for government-allocated gas alone, run across pipelines that do not physically meet.

Shared costs capped at Rs 1 crore

The second set of changes deals with the cost of running the unified tariff system. Pipeline companies sometimes pay bills on behalf of the industry committee, covering expenses “such as auditor fees, portal development and maintenance costs, consultant engagement charges for PNGRB approved studies.” Under the draft, the company that pays such a bill would be allowed to count it as part of the revenue it is entitled to recover that year.

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There would be a ceiling on this. Across all companies and all such expenses, the total counted this way could not exceed Rs 1 crore a year, including taxes, according to the draft. Any amount above that would be split among the companies as it is today. Fees for the independent auditor of settlement amounts and the cost of the IT system used for the calculations would be handled the same way. At present, members of the industry committee share these costs equally.

PNGRB has sought views on the draft from “all stakeholders including general public,” according to a public notice floated by the watchdog. Comments can be emailed to secretary@pngrb.gov.in or posted to the regulator by October 23.

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