Indian Oil says no to unified tariffs for gas transmission

NEW DELHI: State-run refiner Indian Oil Corp has opposed natural gas firm GAIL’s pitch for a unified tariff for its pipelines, saying such a move would raise input cost for its three refineries by Rs 1,000 crore and only help operators of old liquefied natural gas terminals and pipelines.

Indian Oil, BP and Shell have also demanded separation of GAIL’s natural gas transportation and marketing business before shifting to a unified tariff.

Petroleum and Natural Gas Regulatory Board (PNGRB) is debating moving to a unified method for computing gas transmission tariffs that would end the current distance-based tariff.

The proposed unified tariff, aimed at increasing the penetration of gas to far flung areas, would raise tariff for customers closer to the source of gas and lower the cost for far-off customers. The downstream regulator had called an open house on the matter on July 17 in which several gas suppliers and consumers submitted their views.

GAIL has argued that unified tariff will help develop local gas market as it will encourage those located in distant locations to consume gas, according to the minutes of the open house made available by PNGRB. This would also help in raising utilisation of GAIL’s pipelines and expanding infrastructure.

Indian Oil Corp has opposed the move, saying this would raise input costs, resulting in extra outgo of about Rs 1,000 crore for its three refineries at Koyali, Mathura and Panipat. Shell and BP, two international oil majors with operations in India, supported the idea of unified tariff, saying it will help develop the market and raise share of gas in India’s energy basket. They, however, prescribed a few preconditions for this.

“BP supported unified tariff for all cross country interconnected pipelines of all entities and not of a single entity otherwise it would create distortion in transition from entity wise unified tariff,” according to the minutes.

BP said it should be done “after unbundling of transmission and marketing functions of an entity”. Among prerequisites Shell demanded for unified tariff implementation are “independent system operator, uniform code of conduct, and online booking of capacity to ensure transparent allocation of capacity”.

Indian Oil Corporation