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Tuesday, September 29, 2020

Cost rationalisation: PNGRB set to release framework for unified gas transport tariff

Many industry players had opposed the PNGRB proposal to rationalise transport tariffs on integrated gas pipeline networks.

Written by Karunjit Singh | New Delhi | September 10, 2020 3:27:17 am
Many industry players had opposed the PNGRB proposal to rationalise transport tariffs on integrated gas pipeline networks. (File)

The Petroleum and Natural Gas regulatory Board (PNGRB) is set to release a unified gas transport tariff framework to reduce the cost of transportation of gas, a senior government official said. Many industry players had opposed the PNGRB proposal to rationalise transport tariffs on integrated gas pipeline networks such as those of GAIL and Gujarat State Petronet Ltd, pointing out that the move to reduce tariffs for customers further away from the source of gas would lead to cross-subsidisation with customers near sources of gas having to pay more for in gas transport costs.

Petroleum Secretary Tarun Kapoor said that studies by the PNGRB had shown that the hike in tariff for customers near sources of gas would not be too much. The current framework requires gas consumers to pay per pipeline used for the transport of gas, while the proposed framework would allow for a simplified structure offering a single rate for transport of gas done within 300 km and that done beyond 300 km on the same pipeline network regardless of the number of pipelines used to transport gas.

“It turns out that the impact is not too much and in the long run, volumes will increase and with increasing volumes, the tariff may also be rationalised further,” said Kapoor, noting that the regulator would come out with the unified tariff framework soon.

He also said the government was keen to bring competition for city gas distribution (CGD) companies in geographies where the period of marketing exclusivity for such companies had expired. The move to allow competition is set to impact three CGD companies — Indraprastha Gas Ltd, Mahangar Gas Ltd and Gujarat Gas Ltd — for whom the period of marketing exclusivity has ended. PNGRB had released a consultation paper on regulations to open up part of the infrastructure capacity of these firms for marketing of CNG and PNG by third parties.

Kapoor said that PNGRB would release the final framework for opening up of these geographies to competition soon. In response to concerns by stakeholders that the ability of these companies to expand PNG availability to households if they lose market share in the sale of CNG, Kapoor said the regulations had only sought 25 per cent of CGD capacities to be opened up for third parties and that CGD firms would benefit from higher volumes as the gas market grows.

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