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PNGRB directs a reduction in gas tariffs in the national capital

11 Apr 2012 Evaluate

The Petroleum and Natural Gas Regulatory Board (PNGRB) has directed a cut of 64% in the gas tariffs on sale of piped cooking gas to households and CNG to automobiles in the national capital. According to experts, the order will lead to a fall of 10% and 20% in the prices of PNG and CNG respectively. It will also directly impact Indraprastha Gas Ltd (IGL) which is a monopoly supplier in the NCR region.

IGL currently charges a pipeline distribution tariff of Rs. 104.5 per million British thermal units (mBtu) and a compression charge of Rs. 6.66 per kg of gas transported. As per the order, the tariffs have to be reduced to a pipeline distribution tariff of Rs. 38.58 per mBtu and compression charges of Rs. 2.75 per kg. Also, IGL is expected to refund the consumers the excess amount charged since 2008.

The order which is likely to put considerable strain on the finances of the company has been appealed against in the high court. IGL in its defense has stated that it has not been given any opportunity of a personal hearing before passing of the order, despite repeated requests. Hence it has been denied the principle of natural justice. It has also challenged the legality of PNGRB’s power to fix rates. However the regulator is of the opinion the decision was based on technical data and that it had been seeking data from IGL for a while now.

IGL is jointly promoted by state-owned GAIL (India) and Bharat Petroleum Corp (BPCL), which together own 45% of the company. GAIL is the biggest gas distributor in India. As per the new tariffs it is expected that IGL could struggle to make even normal gains on the capital it has invested in the business Also the refund could be in excess of Rs 1,000 crore.

Post the order the shares of other gas distribution companies also fell sharply, on fears that a similar directive may be extended to them.

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