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Gas distributors in demand after PNGRB simplifies gas pipeline tariff

Capital Market 

Shares of four city gas distributors rose by 5% to 12% after the petroleum and natural gas regulator notified regulations for unified gas transmission tariff structure.

Indraprastha Gas (up 12.51%), Mahanagar Gas (up 11.54%), Gujarat State Petronet (up 9.37%), Adani Gas (up 7.36%), Gujarat Gas (up 5.61%) and Gail (India) (up 1.12%) advanced.

Meanwhile, the S&P BSE Sensex was down 70.86 points or 0.16% to currently trade at 44,188.88.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has notified regulations for a unified' tariff structure for over a dozen pipelines that form the National Gas Grid. The move is part of the government's efforts to boost gas consumption in the country.

"Unified tariff shall be determined by the Board in respect of the national gas grid system for each financial year before the start of such financial year," PNGRB has said. At present, the tariff is levied in proportion to the distance transported - the longer the distance, the higher is the charge.

According to media reports, the move will make natural gas more affordable to users far from the source of natural gas or import terminals. However, the move could lead to 20-30% rise in transportation charges paid by users near the source.

The PNGRB has now notified a two-zone tariff structure - Zone-1 will be 300-km from the source of gas (gas field or LNG import terminal) and Zone-II will be beyond that. The tariff for the first tariff zone will be 40% of the tariff for the second zone.

A domestic brokerage reportedly said that unified tariffs will encourage gas transmission companies to set up new pipelines and will result in long term volume growth. Companies like Gail (India) and Gujarat State Petronet will benefit in terms of higher tariffs and profitability, it added.

The PNGRB has restricted existing co-located CNG outlets of oil marketing companies (OMCs) from selling CNG under open access route. OMC outlets already selling CNG will not be allowed to participate through the open access route.

A foreign brokerage reportedly said that this move by PNGRB mitigates any negative impact on existing earnings of city gas distributors in the CNG segment.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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First Published: Fri, November 27 2020. 11:51 IST