Tariff Commission rebukes GAIL transmission fees

Vol 10, PW 16 (30 Nov 06) Midstream & Downstream

GAIL is facing determined resistance from private sector power producers in Andhra Pradesh over its practice of charging a fixed monthly transportation tariff instead of benchmarking the price to actual supplies of gas.

Industry opposition to the fixed GAIL tariff is widespread, but the AP government has complained directly to the influential Tariff Commission. Early this month, the Commission ruled in favour of the power companies in a report submitted to the Petroleum Planning and Analysis Cell of the oil ministry.

After examining its report, the ministry agrees that GAIL has overcharged four customers in Andhra Pradesh between Rs580cr ($132m) and Rs606cr ($138m) since supplies began. (Figures in Rs/thousand cubic metres) Customer Present GAIL tariff Tariff Commission recommendations Tariff suggested by oil ministry GVK Industry Rs805 Rs320 Rs463 Spectrum Power Rs805 Rs320 Rs463 Reliance Energy Rs1258 Rs320 Rs463 LANCO Rs1732 Rs730 Rs833Should GAIL refund the money Yes, believes the Tariff Commission; or offer rebates in future tariffs.

No, says the oil ministry, which in a note believes GAIL should re-examine its tariff to these customers and apply the changed tariff prospectively. No decision has yet to be taken, and the file is with the law ministry for comments.

In the long term, Tariff Commission bureaucrats want GAIL to link transportation tariffs to actual volumes of gas supplied. Across the country, GAIL charges a fixed transportation tariff based on the firm contracted quantity with each customer.

GAILs logic is that it lays a pipeline based on firm quantities of gas contracted with customers on that network. By contrast the ministry believes that if GAILs tariff were linked to the volume of gas supplied, then it would pose problems for GAILs functioning throughout the country.