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Informist, Tuesday, Oct. 14, 2025

 

--Sources: Some PNGRB members object to GAIL pipeline tariff hike proposal

--CONTEXT: GAIL's proposal to up pipeline tariff before PNGRB since Aug 2024

--Sources: PNGRB raises doubts on GAIL rationale, process to fix tariff

 

By Sunil Raghu

 

AHMEDABAD – GAIL (India) Ltd.'s proposal to raise tariff of its gas pipelines have run into a wall of objections from a majority of members of the Petroleum and Natural Gas Regulatory Board, two persons with direct knowledge of the development told Informist. Some of these members are also said to have questioned the rationale and process of fixing tariff in the past as well. GAIL was expecting these updated rates to add INR 34 billion to its profit before tax from the financial year 2025-26 (Apr-Mar).

 

Both, PNGRB members and GAIL held multiple meetings and exchanged several letters to sort out the issues but the tariff award order may take "some more time", a person associated with PNGRB said. He said it seems that PNGRB, too, has erred on its part in the past as one of the views now being debated is whether there is a provision to fix tariffs for integrated pipeline. "This has added to the confusion, delaying the decision, as some PNGRB officials have questioned the very basis and methodology of fixing tariffs," he said.

 

Tariffs for natural gas pipelines are determined by PNGRB, based on norms related to operating costs, capital employed, and capacity utilisation. GAIL had submitted a tariff petition to PNGRB in August 2024 and had sought an increase in integrated pipeline tariff to INR 78 per million British thermal units equivalent, or mBtu, from INR 58.6 per mBtu, which has been prevalent since Apr. 1, 2023. GAIL, India's largest gas pipeline network operator, cited higher operating and capital expenditure as reasons for seeking an increase in tariff.

 

Any increase in pipeline tariffs will have a cascading impact on the prices of the delivered gas. For GAIL, which transports close to 115 mscmd of gas through its pipelines currently, a higher tariff will translate into a steady cash flow. In March, GAIL Chairman and Managing Director Sandeep Kumar Gupta had said that he expected an addition of INR 34 billion to the company's profit before tax if the proposed revision were accepted in full. The company had expected the tariff increase to be okayed in April itself, according to reports.

 

For the government, moderate tariffs are essential to achieve its target of raising the share of natural gas in India's energy mix to 15% by 2030. The outcome of PNGRB's decision on GAIL's tariff hike request, therefore, has a direct bearing on GAIL's earnings trajectory and on cleaner fuel adoption in the country.

 

Since Apr. 1, 2023, a unified tariff regime has been in place across interconnected trunk lines, aimed at providing a common rate for customers and eliminating pricing disadvantages for users located far from gas sources. Under this model, GAIL is entitled to recover an approved level of charges across its grid, provided it is revenue-neutral, and the company does not accrue any additional profit due to this. GAIL's request for a transport tariff of 58.6 per mBtu was apparently approved in the past based on this rationale.

 

Interconnected trunk lines in natural gas transportation are like main highways for natural gas, connecting various smaller pipelines, liquefied natural gas terminals, and consumption centres. The Hazira–Bijapur–Jagdishpur and the Dahej–Bijapur pipelines of GAIL are interconnected trunk lines--they form a continuous grid that lets gas move between western import terminals and users in north India.

 

"A majority of the PNGRB members now are not just objecting to the quantum of hike sought by GAIL but also questioning the formula used by GAIL to arrive at a tariff of INR 58.6 per mBtu," a person working with PNGRB told Informist.

 

PNGRB members informed GAIL that they had approved the INR 58.6/mBtu-tariff based on the assumption that pipeline capacity for tariff determination would be considered at transportation of 98.4 mscmd of gas, instead of the pipeline's full capacity of 109 mscmd. "By using a smaller volume in the calculation, GAIL has supposedly made the per-unit cost look higher than it actually is," another official associated with PNGRB said. "This means that the tariff of INR 58.6 per mBtu itself is erroneous. How can GAIL seek to use similar formulae and ask for another hike?"

 

At 1500 IST Tuesday, shares of GAIL traded 2.7% lower at INR 175.45 per share on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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