The Hindu Business Line : Ministerial panel recommendations on GAIL tariffs accepted

The Inter-Ministerial Group (IMG) headed by the Finance Minister, Mr P. Chidambaram, has accepted the Tariff Commission's recommendations on the pipeline transportation tariff of GAIL (India) Ltd and on the marketing margin on the sale of re-gassified liquefied natural gas (RLNG) by GAIL, IOC, and BPCL from the Dahej terminal.

The Tariff Commission has recommended an integrated transportation tariff for the Hazira-Vijaipur-Jagdishpur (HVJ) and Dahej-Vijaipur Pipe Line (DVPL) routes of GAIL, based on cost of service method for calculations.

The Commission has recommended an integrated base tariff of Rs 831 per million standard cubic metres (MSCM) for the HVJ plus DVPL pipeline system.

In addition, the Commission has recommended an indexation formula to take into account the variation in fuel cost, inflation, tax rates, and the actual volumes of gas transported.

The effective tariff, based on the current fuel cost, inflation, tax rates and volumes of gas transported works out to Rs 960-970 per MSCM of gas.

Currently, the HVJ and DVPL pipelines have distinct transportation tariffs based on the discounted cash flow method of price computation and the current effective weighted average tariff of both the HVJ and DVPL pipelines put together works out to Rs 950 per MSCM.

Therefore, after the revision of the pipeline tariff based on the Tariff Commission formula, there will be an upside in the pipeline revenue stream of GAIL, the company said in a statement.

Further, there is additional pipeline revenue that is expected on account of the pipeline tariff of the Agra-Ferozabad system, which is connected to the mainline HVJ system, GAIL added.

As per the decision of the Ministry of Petroleum and Natural Gas in 2000, the investment made by GAIL on the Bajera-Agra-Ferozabad pipeline system was to be recovered as part of the HVJ tariff, when the tariff was due for review.

Nonetheless, the current recommendations of the Tariff Commission on the HVJ+DVPL pipeline tariff have not included the component of investments on the Bajera-Agra-Ferozabad pipeline system, the company said.

In order to address this aspect, the Tariff Commission has submitted a separate report for the consideration of the Ministry. Once it is accepted, it is expected that this additional recovery would also add to the transmission revenue stream of GAIL, the company added.

The Commission has also recommended a revision in the marketing margin on the current sale of five MMTPA of RLNG by GAIL, IOC, and BPCL, from the Dahej LNG terminal.

The revised marketing margin would be five cents per million British thermal unit (mmbtu) against the current marketing margin of 12 cents.

As a result, a downside in the revenue stream on account of the RLNG marketing margin is expected, the company said.

However, the company expects the downside effect to be mitigated in the current fiscal on account of increase in the sales revenues due to increase in the volume of sale of RLNG through imports of spot LNG cargos by GAIL, and increase in transmission revenues on account of higher volume of RLNG transportation.

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