Regulator lowers tariff for GAIL's Dabhol-B'lore pipeline

The Board said it considered 18% as pre-tax rate of return on capital as against 17.76% submitted by the company

Oil regulator PNGRB has slashed the tariff that state-owned GAIL India Ltd can charge for transporting gas through its Dabhol-Bangalore pipeline. GAIL had proposed a tariff of Rs 73.49 per million British thermal unit for the 1,414 km line that connects the liquefied natural gas (LNG) import terminal of the Maharashtra coast with consumers in Maharashtra and Karnataka.

The Petroleum and Natural Gas Regulatory Board (PNGRB) in a May 30 order said it had approved a provisional levelised tariff of Rs 44.65 per mmBtu with effect from February 18, 2013, the date of commissioning of the pipeline. The pipeline is to carry up to 16 million standard cubic meters per day of natural gas for consumption by users like power plants.

GAIL is nation’s biggest gas distributor, operating nearly 10,000 km of pipelines criss-crossing the country. In the 28-page order, PNGRB said it cut the tariff after considering the actual capital expenditure on laying of the pipeline as well as future capex and rate of return. Against Rs 2,339.57 crore capex projected by GAIL, the Board considered only Rs 2,308.66 crore after considering actual certified expenditure.

Similarly, it scaled down the Rs 1,649.97 crore future capex to Rs 621.64 crore after removing projected cost for laying spur lines which the board felt would require a separate authorisation and tariffs. Operating expense over the 25 year economic life of the pipeline was reduced to Rs 3,387.31 crore from Rs 10,175.66 crore projected by GAIL. The order said GAIL in its tariff submission had considered Rs 1,352.34 crore as residual value of the assets at the end of the economic life.

“As there is a change in both the actual capex and future capex, the terminal value has also been recalculated to Rs 987.04 crore,” it said. PNGRB said it considered 18.18 per cent as pre-tax rate of return on capital as against 17.76 per cent submitted by GAIL. In a separate order, PNGRB approved a tariff of Rs 28.99 per mmBtu for the Kochi-Kottanad-Bangalore-Mangalore gas pipeline as against Rs 59.99 sought by GAIL.

As against the total length of 1,104 km, till date 41 km of the pipeline as been commissioned, PNGRB said adding it considered a capex and operating expenditure of Rs 2,109.50 crore and Rs 2,215.08 crore as against Rs 3,240.37 crore and Rs 5,292.28 crore submitted by GAIL respectively. The pipeline is to connect Petronet LNG Ltd’s import terminal at Kochi to customers.