CNG,piped cooking gas prices slashed

CNG,piped cooking gas prices slashed

Oil regulator PNGRB has slashed the network tariff by 60% and ordered refund to consumers.

Oil regulator PNGRB has ordered Indraprastha Gas Ltd (IGL) to refund excessive tariff billed to consumers on selling piped cooking gas to households and CNG to automobiles in the national capital since April 2008,a decision IGL challenged in Delhi High Court.

The Petroleum and Natural Gas Regulatory Board (PNGRB) in an April 9 order fixed pipeline transportation tariff at Rs 38.58 per million British thermal unit as against Rs 104.05 per mmBtu sought by IGL. Gas compression prices were reduced to Rs 2.75 per mmBtu from Rs 6.66,both changes being effective from April 1,2008.

IGL,which potentially may be impacted by Rs 1,000 crore to Rs 1,700 crore in past dues,said it is not implementing the order immediately pending its appeal against the directive in the Delhi High Court.

“We are not clear how they (PNGRB) have calculated this tariff. We do not know the assumptions they have made,” IGL Managing Director M Ravindran said. “We have today approached Delhi High Court,challenging the constitutionality and legality of the powers of the PNGRB to fix the tariff.”


IGL plunged as much as 51 per cent to Rs 170 before closing at Rs 229.80 on the Bombay Stock Exchange (BSE).

Ravindran said the company was not given a “fair chance” to implede its case before PNGRB passed its order. “There are differences (with PNGRB) on many counts… the gas volumes,capacity utilisation and the pipeline network (taken into account for calculating the tariff).”

IGL may not be able to raise its margins to accommodate the refund on tariff as the margins too would be determined by PNGRB.

IGL in 2010-11 had a total revenue of Rs 1,750.46 crore and a net profit of Rs 259.77 crore. If it were to implement the order,its outgo would be a minimum Rs 1,000 crore and may go up to Rs 2,200 crore if some analysts are to be believed.

Though IGL insisted that it was not duly consulted before PNGRB passed the order,the 13-page order stated that the Board and its consultants had sought clarifications over data on capital and operating expenditure submitted by IGL in May 2009.

“During the process of verifying the cost and other data for determination of the network tariff and compression charge for CNG in respect of the Delhi city gas distribution network,certain issues arose on which clarifications were requested from IGL,by both the consultants and the board.

“Since the exercise of obtaining clarifications from IGL and their appropriate resolution is time-consuming requiring cooperation of all the stakeholders and also given the fact that determination of transportation tariff was being carried out for the first time,closure o this issue could be affected only by June 2011,” the order stated.

IGL’s challenge on PNGRB’s constitutional and legal powers to fix the tariff may also face hurdle as the PNGRB Act of 2006 specifically entrusts the Board of the responsibility to lay down the transportation tariff for city or local natural gas distribution network.

Fears of similar PNGRB orders for other CGD distributors triggered fall in shares of Gujarat Gas Co,which fell 15.10 per cent,and Gujarat State Petronet Ltd that dropped 7.50 per cent on BSE. GAIL India Ltd,the nation’s biggest gas distributor and part-owner of IGL,declined 1.82 per cent.

Petronet LNG was down 3.1 per cent.

Ravindran refused to speculate on the financial impact of the order saying the company had not assessed it and would wait for the outcome of its appeal in the Delhi High Court.

Delhi High Court may this week decide on admissibility of the petition.

IGL,PNGRB in the order said,shall recover the Network Tariff and Compression Charge for CNG separately through an invoice without any premium or discount on a non-discriminatory basis.

“… the difference between the Network Tariff and Compression Charge for CNG submitted by IGL and that determined by the Board … would be reflected through appropriate reduction in selling prices from the date of issuance of this order (April 9),” PNGRB said.

The Board said the modalities and timeframe for refund of differential Network Tariff and the Compression Charge for CNG for the period from April 1,2008,till the date of issuance of the order shall be decided and advised subsequently.

Ravindran said IGL was “examining all the contents,implications and financial impact of the order.”

“Though IGL submitted the tariff in 2009 to the Board,it also raised various issues on the powers of the Board to fix the tariff which was never addressed by the Board. PNGRB has finalised the tariff now around 3 years after the submission,” he said.

IGL,he claimed,”was not given any opportunity of personal hearing before passing of the order by PNGRB despite repeated requests.”


“Since IGL was denied the principle of natural justice,IGL has approached today Delhi High Court where we have challenged the constitutionality and legality of the powers of the PNGRB to fix the tariff,” he said.