Major transporters against zonal tariff for Gas

NEW DELHI: Major gas transporters such as Gail India are seeking a uniform pipeline tariff for all customers independent of their distance from the gas field at a time when the downstream regulator is considering various options for major projects including the 1,375 km east-west pipeline of Reliance Gas Transportation Infrastructure Ltd (RGTIL).
RGTIL is currently charging a provisional tariff determined by the Petroleum & Natural gas Regulatory Board (PNGRB) since June 2010. This is based on the principle of "zonal" tariff, in which the tariff rises every 300 km down the line. The other system called "postalised tariff ", favoured by Gail, is akin to a postcard, which costs the same for any address in the country.

Gail has argued that the current system of zonal tariffs puts a huge burden on customers located far from the source of gas, and will encourage investments near gas fields, although gas is so scarce in the country that many factories are ready to use LNG that is four times cost of local supply.

Gail India says postalised tariff is better because the market in India is not mature. "Application of postalised tariff structure will promote use of natural gas as input as well as fuel in the areas which are far from the gas source. In turn it will ensure better capacity utilization of pipeline network and benefit of economy scale will get passed on to customers near to the gas source as well," Gail India General Manager NS Parthasarathy said in a representation to the regulator.

RGTIL wants the regulator to make zonal tariff system more flexible. "Instead of fixing 300 km distance for given zone, entity should be allowed to fix/devise zones suitable with its business strategy," the company told the regulator in a note.

Another tariff system called "truing up" has been proposed by Gujarat State Petronet Ltd (GSPL). This is similar to the power sector where companies apply to the regulator for a tariff on the basis of actual capacity utilization and costs.

The industry is unanimous that eventually the regulator should shift to "entry-exit" tariff model. But Indian Oil Corp GM (gas business) RK Tiku said, "In a country like India wherein pipeline system has been evolving slowly, this model shouldn’t be introduced now."