Dispute over price through Gujarat Gas pipeline

Vol 7, PW 12 (27 Aug 03) Exploration & Production

Gujarat Petronet is also locked in dispute with BG subsidiary Gujarat Gas.

At issue is the transmission tariff paid by Gujarat Petronet for use of the 73-km, 18-inch Gujarat Gas pipeline from Hazira to Ankleshwar to transport gas from its Hazira gasfield. Gujarat Petronet wants the tariff for 2003-04 slashed to Rs6cr ($1.3m) from the Rs50cr ($10.86m) it claims to have paid Gujarat Gas in 2002-03.

"GSPL is exaggerating," a Gujarat Gas source tells us. "They paid us only Rs36cr ($7.5m) in 2002-03." Last month, Gujarat Gas offered to reduce its annual tariff to Rs21cr($4.56m), but Gujarat Petronet says it cannot afford to pay more than Rs6cr per year.

GSPL wants us to reduce our annual tariff from Rs0.25 per cubic metre to a mere Rs0.08 per cubic metre, adds a source. Counters Gujarat Petronet: The gas transmission charge is a pass-through component and our customers are angry and not ready to pay such a high amount.

In March, Gujarat Petronet demanded state government intervention to "persuade" Gujarat Gas to slash its tariff to an "affordable" price. Next month, Gujarat energy minister Saurabh Dalal and energy secretary Manjula Subramanium wrote separate letters to Gujarat Gas for an explanation.

Gujarat Gas replied that it had already reduced the tariff twice for Gujarat Petronet and any further reduction would harm its business, "as GSPL is the pipeline's main customer." In 2000, Gujarat Petronet signed a five-year agreement with Gujarat Gas to transport 0.5m cm/d gas from Hazira to Ankleshwar at a tariff of Rs0.70 per cubic metre. Soon after, Gujarat Petroleum renegotiated the tariff down to Rs0.35 per cubic metre, before the gas started flowing in July 2001.

"We did not want to upset the government and after much arguments and persuasion agreed to bow down to GSPL," adds a Gujarat Gas source. But Gujarat Petronet feels even the current tariff is too high.

High transportation charges are affecting GPECs power generation and in turn this makes its power supply to the Gujarat Electricity Board very costly to about Rs2.70 per unit."

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