PNGRB defines zones, notifies unified tariffs for interconnected gas transmission pipelines

The Petroleum and Natural Gas Regulatory Board (PNGRB) has notified unified tariff of Rs 73.93 / MMBtu (Rs 2.60/scm) for all the interconnected gas transmission pipelines owned / operated by multiple entities including IOC, ONGC, GAIL, PIL, GSPL, Gujarat Gas, Reliance Gas, GSPL India Gasnet and GSPL India Transco.

The tariff addresses estimated gas volumes of 189 mmscmd, including 107.9 mmscmd of GAIL and 35.7 mmscmd of GSPL volumes estimated for financial year 2024.

The final PNGRB order incorporates the changes required in the Unified Tariff due to issuance of zonal tariffs of INGPL and tariff of UTNGPL. The tariff will be apportioned over three zones, Zone 1 to Zone 3, with tariff of Rs 39.45/ MMBtu, Rs 74.97/ MMBtu and Rs 99.90/ MMBtu respectively. Zone 1 is defined as up to 300 kilometers, Zone 2 is between 300-1,200 kilometers and Zone 3 is more than 1,200 kilometers.

As per city gas companies, Indraprastha Gas Ltd. (IGL) and Mahanagar Gas Ltd. (MGL), the higher tariffs as indicated by earlier PNGRB order for the integrated pipeline network of GAIL may create an additional Rs 1-1.5/kg on CNG prices.

ICICI Securities believes, as and when Kirit Parikh Committee recommendations are adopted, the city gas distribution companies get a leeway of Rs 8-9/kg cost reduction from current levels and hence can easily pass through this increase.

As per ICICI Securities, for GAIL, the final PNGRB order may create some revenue shortage as the order shifts 13 mmscmd of volumes to Zone 2 instead of Zone 3 and 4 as envisaged by GAIL, this creates a revenue implication of Rs 400 crore annually.

“We note however that this is a shortfall only versus applied for tariffs, as the declared tariffs are anyways well above existing tariffs for GAIL,” adds ICICI Securities.

For GSPL, ICICI Securities believes, the final order is marginally negative for city gas distribution costs, neutral for GAIL and positive for GSPL.

Aditya Suresh of Macquarie also told CNBC-TV18 that the impact of this order in GAIL's earnings is substantial. He also said that GAIL stands to benefit the most from this tariff order in terms of earnings.