GAIL Pipeline Tariff Hike: Rs 3,400 Cr Boost to Margins

New Delhi, Mar 28 (PTI) GAIL (India) Ltd is likely to get up to a 35 per cent rise in the integrated tariff for transporting natural gas through its pipeline network, potentially boosting the state-owned company's pre-tax earnings by as much as Rs 3,400 crore annually, the company chairman Sandeep Kumar Gupta said.

The levelised tariff of the integrated pipeline network, which carries about 90 per cent of volume as of date, is Rs 58.61 per million British thermal units.

The revision in integrated tariff - the one the power plants, fertiliser units and city gas operators pay for receiving gas through GAIL's 10 pipelines - is primarily driven by the need for GAIL to cover increasing operational and maintenance costs while also incentivising further investment in the pipeline infrastructure.

"As requisitioned by the regulator, we have submitted requisite details for review of tariff in August 2024. The revised tariff filed is Rs 78 per mmBtu," he said, adding that as per regulations the public consultation will be held shortly and a revised tariff order will be issued by the regulator.

The tariff review process is expected to conclude by the first quarter of the 2025-26 fiscal (April 2025 to March 2026 financial year).

"On an annualised basis, this would increase our profit before tax by up to Rs 3,400 crore," Gupta said.

The government is keen on raising the share of natural gas in the country's energy basket to 15 per cent by 2030 from the current 6.2 per cent as part of its energy transition goals. Towards this, GAIL is connecting newer areas with pipeline networks to take less polluting fuel to unconnected areas.

As more areas are connected to the pipeline network, GAIL may see a gradual increase in demand for transportation services. This increased demand, combined with infrastructure upgrades, may lead to the revision of tariffs.

The Petroleum and Natural Gas Regulatory Board (PNGRB) is likely to approve the revised tariff shortly, Gupta said.

PNGRB, while fixing the tariff in 2023, considered a price of government-controlled domestically produced gas, known as APM gas, at USD 3.61 per mmBtu for internal consumption in the running of the pipeline. This rate is no longer applicable after the APM gas was diverted to meet CNG needs.

There is an annual under-recovery of about Rs 1,200 crore on this account.

Also, the regulator has got volume determination done by EIL, which is on the lower side.

"Considering these two factors only, we are expecting an increase of Rs 10-12 per mmBtu," he said.

PNGRB is expected to balance the need for higher tariffs to cover GAIL's rising costs and the government's commitment to keeping natural gas affordable for consumers.

The increase in tariffs will help GAIL maintain and expand its network, boosting its earnings while aligning with broader government policies aimed at increasing natural gas usage across the country.

On the public consultation initiated by PNGRB for changes in natural gas pipeline regulation, Gupta said the regulator has proposed to have two tariff zones instead of three currently.

The tariff zones are proposed to be divided into two parts, up to 300 km and beyond that. Importantly, transmission tariffs for CNG and piped cooking gas (PNG) are proposed to be covered in the first zone of unified tariff irrespective of where the entity draws the gas, he said, adding that this was a positive development and would give the sector and gas demand from the city gas sector a fillip.