The Hindu Business Line : GAIL pricing: NFCL files protest with Govt

The differential pricing standards being adopted by GAIL (India) Ltd for transportation of gas to its industrial customers in the natural gas hub of the country KG Basin vis-à-vis the Hazira-Bijaipur-Jagdishpur (HBJ) pipeline have resulted in Nagarjuna Fertilisers & Chemicals Ltd (NFCL) suffering losses of over Rs 20 crore over the last few years.

Speaking to Business Line, Mr R.S. Nanda, COO of NFCL, said that while GAIL levies transportation charges on customers in the HBJ pipeline in proportion to the quantity supplied, it has been collecting fixed charges from the customers in the KG Basin with a three per cent escalation every year despite the fact that the gas supplies in the region are declining both on account of dwindling gas supplies and allocation of gas to more consumers beyond availability.

Official sources said that the company has raised the issue with Ministry of Chemicals and Fertilisers, which in turn has referred the matter to the Petroleum Ministry, asking it to address the existing anomalies in transportation charges. GAIL, on the other hand, is awaiting a directive from the Petroleum Ministry.

More or less same

According to GAIL, tariff is calculated on the investment made on pipeline and operational expenses.

It maintained that the basis of tariff calculation for both KG Basin and HBJ pipeline customers were more or less same.

The only difference is that for HBJ the compression charges are also part of the operational expenditure resulting in the transportation charge to be linked to volume of gas being supplied.

NFCL contention

The transportation charges, which should have come down as a result of new consumers joining the gas network and sharing the costs, continued to increase at three per cent per annum for reduced gas supplies, NFCL said.

The Hyderabad-based company has a contract with GAIL for supply of 2.14 million standard cubic metre (mmscmd) of natural gas, but is currently able to draw only around 1.65 mmscmd.

As a result, NFCL is now paying Rs 609.25 per 1,000 SCM of gas against Rs 493.52 in 2002-03.

The company, which paid Rs 36.34 crore to GAIL as transportation charges in 2002-03 for consuming 736.41 mmscmd, had to pay Rs 39.71 crore for 651.83 mmscmd last fiscal, Mr Nanda said.

The falling supplies of natural gas from GAIL have forced the company to meet the shortage through naphtha, which has resulted in the manufacturing charges nearly doubling.

"This increases the subsidy burden on the Government substantially by around four times a quintal. We had taken up the issue with GAIL and urged for reduction of the transportation charges, but it expressed its inability to do so," Mr Nanda said.

Tariff panel report

The Tariff Commission, which was assigned with the responsibility of studying the reasonableness of transportation charges for HBJ pipeline, has also conducted a similar study for KG basin and submitted its draft recommendations to Ministry of Petroleum & Natural Gas.

Stating that the fertiliser units located along the HBJ pipeline were paying the gas transportation charges in proportion to the quantity supplied, the Tariff Commission said that it was appropriate to charge tariffs based on actual quantity of gas supplied in the KG basin as well.

More Stories on : Petroleum | Corporate Disputes | Fertilisers | GAIL (India) Ltd

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