GAIL set to benefit from depreciation rate cut

Gas utility GAIL India on Tuesday said it would benefit from the depreciation rate cut on oil and gas pipelines. The Department of Company A...

Gas utility GAIL India on Tuesday said it would benefit from the depreciation rate cut on oil and gas pipelines. The Department of Company Affairs had cut the rate from 10.34 per cent a year to 3.17 per cent based on the useful technical life of 30 years.

“The move would benefit investors and enhance their wealth by rewarding them with higher returns due to the increase in the book profit of the company,” GAIL said.

The move follows GAIL’s efforts to eliminate disparity in depreciation rates, considered for tariff calculation and book accounting. Prior to this order, the depreciation rate for tariff calculations was 3.17 per cent while the depreciation for book accounting was taken as 10.34 per cent. Consequently, the books of accounts reflected a lower asset value.“The parity in the depreciation rates would result in not only lesser provision towards book depreciation but also reflects the actual book value of pipeline assets,” it said. — PTI

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