Oil Regulator PNGRB Rolls Out Unified Tariff Scheme for Major Natural Gas Pipelines

In its efforts to bring India closer to becoming a ‘Gas-Based Economy’, the Petroleum and Natural Gas Regulatory Board (PNGRB) revealed on Thursday a unified tariff for over a dozen interconnected pipelines including GAIL’s network of seven pipelines that form the Natural Gas Grid.

The move has been taken to ensure continuous access of Natural Gas in the areas distant from LNG terminals and Natural Gas sources located on the west coast of the country at affordable rates. The new tariff structure will lead to a 20-30 per cent rise in freight charges paid by users near the source but a notable reduction in cost paid by the consumers in the far-flung areas. PNGRB has notified a two-zone tariff structure wherein Zone-1 will be 300-km from the source of gas and Zone-II will be beyond that. PNGRB has notified that the tariff for the first tariff zone will be nearly 40 per cent of the tariff for the second zone.

As stated by an industry expert, this, for example, would mean an immediate increase in tariff for consumers such as power plants and fertilizer units in Gujarat, which are directly linked to ONGC's offshore gas field and house gas import terminals. However, consumers distant from the gas source, say in Uttar Pradesh or Bihar, will benefit as they would now have to pay a lesser tariff. It is believed that this step for consumers to pay a unified tariff, is in accord with the government’s efforts to boost Natural Gas consumption in the country and would favor the new entrants in the market over the incumbents. The pipelines which will be a part of the unified tariff plan are under the ownership of GAIL India Ltd., Reliance Industries (RIL), Indian Oil Corp. (IOC) and Gujarat State Petroleum Corporation Ltd. (GSPL). All entities except GAIL are in favor of a unified tariff for all interconnected pipelines.

ChemAnalyst anticipates that with increasing domestic gas production has been nowadays a key focus of the Indian government. The new tariff scheme is a major step towards achieving the motto of ‘One Nation One Gas Grid’ to ensure a gradual shift of India towards a gas-based economy and easy gas access to several fertilizer, power plants, city gas distribution, steel and other industries across the country.