The sun shines through gaps between pipework in a distillation plant. (Photographer: Bartek Sadowski/Bloomberg)

Oil Regulator Hikes Tariff Of Pipeline Transporting Reliance Industries’ Gas By 37%

The Petroleum and Natural Gas Regulatory Board approved a 37 percent rise in tariff from April 1 for the pipeline that transports Reliance Industries’ eastern offshore KG-D6 gas to customers.

The oil regulator, in its March 12 final tariff order, said transporting natural gas on the east-west pipeline would cost Rs 71.66 per million British thermal unit on gross calorific value basis from April 1. This compares with Rs 52.33 per mmBtu tariff charged for April 1, 2009-March 31, 2019, period.

The tariff approved is almost half of that sought by East West Pipeline Ltd.—the operator of the pipeline. It had sought the tariff to be raised to Rs 151.84 per mmBtu, effective April 1, 2018.

A rise in tariff would lead to an increase in the price of fertiliser as well as city gas like CNG that uses gas brought through the pipeline starting from Kakinada in Andhra Pradesh and running up to Bharuch in Gujarat.

The pipeline — a wholly owned subsidiary of Mukesh Ambani’s private-arm Reliance Utilities Private Ltd. — primarily transports KG-D6 gas, which has steadily dipped from 69.43 million standard cubic meters per day achieved in March 2010 to under 3 mmscmd.

The regulator in a 49-page order went into cost calculations and other parameters to fix the tariff.

“The tariff has been worked out based on information provided by the entity and deliberations. However, the regulator intends to verify/audit the information provided for tariff determination and method of cost allocation, etc. by its internal team or by an external agency,” the order said.

The tariff, it said, will be subject to revision based on the audit of information and data.

Originally, East West Pipeline had proposed a levelised tariff of Rs 55.91 per mmBtu for transporting the gas beginning April 1, 2009 but the regulator fixed a provisional tariff of Rs 52.53 per mmBtu.

The company in October 2017 proposed a final tariff for the pipeline at Rs 78.72 effective from April 1, 2009, till the end of the economic life of the pipeline—up to March 31, 2034.

When the regulator sought clarifications, East West Pipeline updated the tariff filing to state that Rs 52.23 per mmBtu would be the tariff till 2017 and Rs 151.84 would be charged from 2018-19 to 2035-36.

The order said the pipeline operator claimed a total capex of Rs 18,307.37 crore under two heads—actual capex of Rs 16,347.96 crore and future capex of Rs 1,959.41 crore.

The regulator said when it first fixed the provisional tariff, it had assessed the pipeline’s carrying capacity of 85 million standard cubic metres per day, including 21.25 mmscmd for use on a common carrier, open access and non-discriminatory basis by any third party.

But the company challenged this first before the Appellate Tribunal of Electricity and then before the Delhi High Court. The court had in April last year ordered fixing of the tariff once the quorum of the regulator was complete.

Also read: India May Hike Price Of Natural Gas By 10% For ONGC, Reliance Industries

The regulator became fully functional a year back when the government made appointments of chairman and members of the board.

The regulator sought views of stakeholders on East West Pipeline’s tariff filing and gave a detailed order after considering all views.