Gas infrastructure major GAIL seeking uniform pricing

KOLKATA (miningweekly.com) – Indian gas infrastructure major GAIL India has proposed a unified or pooled price for all its customers linked to its network of gas pipelines across the country.

GAIL says that a unified price will eliminate differential tariffs and taxes based on the distance of locations from the infrastructure major’s liquefied natural gas (LNG) terminals across the country.

It also claims that a uniform price will rectify the difference in gas prices charged for its old and new customers.

In its petition to the government, GAIL has suggested that the unified pricing regime should first be implemented for its own network and then be expanded across the pipeline network of other gas infrastructure companies.

Based on GAIL’s communication, the downstream natural gas regulator, Petroleum and Natural Gas Regulatory Board (PNGRB), has issued a consultation paper seeking the views and comments of all stakeholders.

However, the government is yet to decide whether the sector regulator will be given the mandate to determine the uniform price or whether the Ministry of Petroleum and Natural Gas will issue guidelines to work out the formula, based on which PNGRB will announce a unified price for consumers, a government official has said.

A new uniform tariff is expected to benefit GAIL, which operates LNG terminals with comparatively low capacity utilisation.

PNGRB, in its preliminary reaction, has expressed apprehension that tariffs for existing gas customers of GAIL will increase, impacting on the cost of end-use production of these customers.

However, infrastructure companies have pointed out that a tariff increase will not impact on end-use producers in sectors such as fertilisers, for instance. Fertiliser producing companies use natural gas that is subsidised by government on a cost-plus basis and these companies benefit from the ‘pass-through’ element of the current subsidy regime.