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Informist, Saturday, Nov. 29, 2025

 

AHMEDABAD – The Petroleum and Natural Gas Regulatory Board's approval for a 12% increase in tariff for GAIL India Ltd.'s integrated natural gas pipeline network fell short of the expectations of the company and its investors. This despite GAIL claiming that the upward tariff revision approved by the country's oil and gas regulator would have a positive impact of nearly INR 12 billion.

 

GAIL had submitted a petition to PNGRB in August 2024 to allow it to raise the natural gas transportation tariff for its integrated pipeline tariff to INR 79.98 per million British thermal units equivalent, or mBtu. GAIL wanted to raise tariffs from INR 58.6 per mBtu, which had been prevalent since Apr. 1, 2023. India's largest gas pipeline network operator cited higher operating and capital expenditure as reasons for seeking an increase in tariff. GAIL currently transports around 115 million standard cubic meters per day of natural gas through its pipelines, and a higher tariff would translate into a steady cash flow.

 

In March, GAIL's 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 and the financial benefit would come in for the full financial year 2025-26 (Apr-Mar). PNGRB, however, approved only in November-end a levelised tariff of INR 65.69 per mBtu, on a gross calorific value basis. This was a little more than one-third of what GAIL had expected and expressed. Also, this new revision would be effective only from Jan. 1, 2026, with three quarters of FY26 already over by then.

 

Tariffs for natural gas pipelines are determined by PNGRB, based on norms related to operating costs, capital employed, and capacity utilisation. 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. 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 natural gas move between import terminals on the western coast of India and the users in north India.

 

Any increase in pipeline tariffs has a cascading impact on the prices of the delivered gas. However, 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, in its filing with the stock exchanges Friday, has called the approved tariff order an "interim order". Post its June quarter earnings, GAIL's management had informed analysts that normally the periodical review of tariffs happens once in five years and not before three financial years. Rakesh Kumar Jain, director-finance, GAIL, had then said that PNGRB had called for submission because there is a provision in the regulation that if any change in substantial parameters takes place, then either GAIL can approach or PNGRB can ask for a tariff revision. As there was a substantial change in parameters in terms of capacity and gas prices, PNGRB did not follow the regular timeline.

 

For now, PNGRB has limited the current adjustment to system use gas or natural gas that a pipeline company uses to keep running its own operations and capacity determination only. The true-up of all other parameters such as actual and future operational expenses and capital expenditure, transmission loss, working days, revenue-sharing adjustments, and other regulatory amendments, will be undertaken during the next tariff review exercise in 2027-28 (Apr-Mar), which would be effective Apr. 1, 2028.

 

The company posted a net profit of INR 22.17 billion for the September quarter, down 17% on year. GAIL's revenue for the quarter rose 6% on year to INR 350.31 billion. The stock of the country's largest natural gas transportation company ended 4.2% lower at INR 176.09 on the National Stock Exchange on Friday, after falling over 6% intraday.  End

 

Reported by Sunil Raghu

Edited by Tanima Banerjee

 

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