Regulator fixes lower pipeline tariff for GAIL; stock slumps

Oil regulator PNGRB has fixed transportation tariff of GAIL India Ltd's main trunk natural gas pipeline at half of what the state-owned firm wanted, sending its stock nosediving.

The Petroleum and Natural Gas Regulatory Board (PNGRB) in its transportation charge order for the 3,452-km long pipeline originating from Hazira in Gujarat and going up to Jagdishpur in Uttar Pradesh via Vijaipur in Madhya Pradesh (called HVJ pipeline) fixed levelised tariff for the integrated pipeline at Rs 41.11 per million British thermal unit.

This was lower than Rs 97.04 per mmBtu tariff that GAIL had sought, citing a capex spending of Rs 24,708 crore over the economic life of the pipeline lasting till 2035.

GAIL's had in 1997 laid the HVJ pipeline to carry natural gas from western offshore fields to consumers such as power and fertilizer plants right up to Uttar Pradesh. Later, it laid another Dahej-Vijaipur pipeline in 2004 to meet additional demand. This was called HVJ Upgradation line. Together, the two lines are know as HVJ Integrated pipeline.

While HVJ had a total carrying capacity of 57.30 million standard cubic meters per day (mmscmd), HVJ Upgradation had a capacity of 54 mmscmd.

GAIL, according to the order, sought a tariff of Rs 114.79 per mmBtu for HVJ, Rs 79.28 per mmBtu for HVJ Upgradation and Rs 97.04 for Integrated HVJ.

The levelised tariff of HVJ and HVJ Upgradation is Rs 25.46 per mmBtu on gross calorific value (GCV) basis with effect from November 20, 2008 and Rs 53.65 per mmBtu on GCV basis with effect from March 27, 2010, respectively, the PNGRB said.

"Levelised tariff determined under this order, for Integrated HVJ is Rs 41.11 per mmBtu on GCV basis," it said, adding the tariff will be applicable from July.

This order led to brokerages cutting the company's earnings per share estimates by 3-4 per cent for 2019-20 and 2020-21.

GAIL stock was the top loser among the Nifty 50 stocks Thursday, declining 11.4 per cent. It ended at Rs 316.30, down from Rs 358.25 closing on Tuesday.