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Gail backs DGH proposal on pipeline tariffs

22 Mar 2011 Evaluate

Gail India has endorsed petroleum sector regulator's proposal allowing pipeline companies to charge tariffs lower than approved rates but the move has been opposed by Reliance Gas Transportation Ltd. The regulator's move aims to promote competition in gas transportation sector which is expected to grow fast after Reliance recently tied-up with global energy major BP to source and market natural gas in India. Gail has, however, cautioned that the freedom to offer discount could be misused by companies having interests in both gas production and its transportation. Reliance Gas Transportation Ltd (RGTIL), a company privately held by Mukesh Ambani and promoters of RIL, asked the regulator to 'defer' the move till the Indian natural gas market is matured.

RGTIL currently operates the $3.75 billion East-West gas pipeline from Kakinada (Andhra Pradesh) to industries hubs of Karnataka, Maharashtra and Gujarat. It will also connect major industrial towns in southern India and in the eastern coast up to Haldia (West Bengal), through four other pipelines expected to be commissioned in the next two years. Email queries to Gail and RGTIL did not elicit any response. Reliance Gas Transportation has told the Petroleum & Natural Gas Regulatory Board (PNGRB) that cross-subsidization should be permitted if it allows transporters to offer discounts. The proposed move would give flexibility to pipeline operators. It is not necessary for gas transporters to give discount if there is no competition, but the flexibility will help them if they have additional capacity. The regulator's proposal would help the major consumers of natural gas, power and fertilizer firms in reducing cost.

 

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