Details of GAIL's gas pricing policy

Vol 5, PW 13 (15 Aug 01) Midstream & Downstream

Gas Authority of India tells Petrowatch the table on gas prices we carry in our DATAWATCH below "gives the erroneous impression that the difference in the purchase and sale price is accruing to GAIL." A GAIL spokesman remarks: "This is not correct.

GAIL does not earn any margin on the sale price of gas. The difference actually goes to the Gas Pool Accrual account and is not retained by GAIL." Confused You might be.

First question: what exactly is the pricing formula used by GAIL Below we re-produce a detailed chart with additional explanation: General Gas Pricing Policy (effective till July 2000) Final Price Paid By Consumer Consumer Price This is linked to a basket of internationally traded fuels with parity of 75% for FY2000 at 10,000 kcal/MSCM. For reasons best known to itself, the government is holding back an upward revision to 85% and full import parity Floor price stands at Rs2,150 ($45.75) per million cubic metres a day; ceiling price stands at Rs2,850 ($60.63) per million cubic metres a day, assuming Rs47/$1 + (Plus) Transmission Charge (charged by GAIL only on HBJ) Rs1,150 ($24.46) linked to calorific value of 8,500 kcal/MSCM for transmission on the Hazira-Bijaipur-Jagdishpur pipeline + (Plus) Royalty & Taxes (charged by state governments) Royalty: 10% of producer price paid to local state administration Sales Tax: State dependent and varies between 4-20% - (Less) Joint Venture Consumer Price Differential + (Plus) Gas Pool Accrual Account Higher price paid to Joint Venture companies (Ravva, PY-3, Tapti) against consumer price, presently equivalent to 75% of a basket of internationally traded fuels; and gas pool account to cover subsidised price of gas in northeast.