Double my transmission tariff, says GAIL

Vol 16, PW 26 (25 Jul 13) Midstream & Downstream

GAIL is poised to begin another round of endless tit-for-tat arguments with the gas regulator.

This time over the low transmission tariff fixed by the PNGRB for gas shipped through a pipeline from Dadri in Uttar Pradesh to Nangal in Punjab, completed and commissioned in March 2012 with 31m cm/d capacity. GAIL is planning to file a formal complaint with the PNGRB over its decision four months after the pipeline was fully commissioned (in July 2012) to fix a tariff of Rs11.85/mmbtu for gas flowing through the 621-km pipeline, laid at a cost of Rs2200cr ($370m).

GAIL will argue that the transmission tariff should be more than doubled to Rs27.73/mmbtu. GAIL’s argument is compelling: the PNGRB wrongly calculated the tariff by assuming the pipeline was fully utilised from January 2010.

Incorrect! Only 7.5m cm/d capacity was commissioned by January 2010 - up to Bawana in Delhi. GAIL fully commissioned the pipeline with 31m cm/d capacity only in March 2012.

In a point-by-point rebuttal GAIL will argue the PNGRB miscalculated the tariff because it wrongly assumed the pipeline is today utilised at 31m cm/d capacity. Yet today only 18m cm/d flows through the pipeline.

GAIL will further argue the Board wrongly assumes that 13m cm/d capacity set aside for others through the ‘common carrier’ principle is utilised. But no third party has contracted anything, so GAIL believes it should count as zero in tariff calculations.