PNGRB to approve RIL, GAIL pipeline rates soon

The rate for the gas pipelines of Reliance Gas Transportation India Ltd and GAIL India would be decided soon by the downstream oil sector regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB).

“The two consultants — Ernst & Young and Crisil — will evaluate the proposals submitted by the two companies and give a report to the Board, (which) will finalise after studying the report in the following two weeks,” said a board official.

He said the new rate would apply from the date of notification of the regulations in this regard, which was November 20, 2009, or the date when the pipeline began operations, whichever was later. The consultants would scrutinise the companies’ proposals and ensure the expenditure shown was justified. The rate decided would be based on the expenditure incurred in construction, operating cost and a 12 per cent return on investment.

“If the tariff being charged by the entity is different from the new one, adjustments will be made either in favour of the consumer or the entity with effect from such a date,” the official said.

Currently, in the interim, Reliance Gas Transportation is estimated to be charging Rs 16.32/million British thermal unit (mBtu) for the gas delivered in a zone of 300 km from the site of production and Rs 60/mBtu for transporting gas beyond 300 km. GAIL, however, charges Rs 28.48/mBtu.

Analysts say even after revision, the rate for GAIL’s pipeline would be cheaper than Reliance’s, since GAIL’s pipeline is old and was, therefore, constructed at a lower capital cost and the depreciation would be taken into account while deciding the new figure.

Reliance Gas Transportation’s 1,385-km east-west pipeline network traverses from Kakinada in Andhra Pradesh to Bharuch in Gujarat. It is a vital trunk pipeline that carries gas from the Krishna-Godavari Basin to consumers in several states. GAIL’s Hazira-Vijaipur-Jagdishpur (HVJ) pipeline covers 2,800 km.

The official, however, added that GSPC and Gujarat Gas, which have pipelines in Gujarat, have not made a proposal for rate fixation. “Their pipelines have not been authorised by the Board due to the legal cases that have been filed challenging the Board’s power to grant authorisation,” he said.