Gas transportation tariff increases fuel cost for distant consumers

NEW DELHI: The petroleum regulator’s decision to charge incremental gas transportation tariff for every 300 kms has resulted in an unprecedented increase in fuel cost for consumers located away from the natural gas source.

For example, KG-D6 gas consumers in Delhi pays a transportation charge which is about 70% of the gas price at source ($4.20 per unit), while the fuel costs 100% more in Punjab and Jammu & Kashmir. The higher tariffs have already been passed on to the consumers.

“Industries such as ceramics, textiles and glass have raised the issue, however, retail consumers are not aware about it,” said a senior executive with a city gas distribution (CGD) company. Natural gas fuels automobiles, kitchens and industries.

An oil ministry official confirmed the ministry had received representations against the zonal tariff system from industries.

The industries are seeking the restoration of the postalised tariff system where transportation charges are uniformly applicable throughout one particular pipeline, he said, requesting anonymity. The demands are being examined, he said.

The postalised system was devised on the principle of post card, which was delivered throughout the country at a uniform price. But the Petroleum and Natural Gas Regulatory Board (PNGRB) denied receiving any formal request from consumers asking for a review of the zonal tariff method.

The board has implemented the zonal tariffs as per legal provisions “after going through an elaborate process of public consultation with various stakeholders and after arriving at a broad consensus on tariff determination,” PNGRB secretary Ratan P Watal said.

He accepted that customers located farther from the gas sources will pay higher tariff, but said that zonal tariff system is not discriminatory to any particular category of customer.

“Even sectors like the railways and civil aviation follow a differential transport tariff regime linked to distance,” he said.

His view doesn’t find much purchase among industry officials. “The move will kill industries located at the far end of the pipeline as they would no longer be cost-competitive,” said a chief executive of a state-owned energy firm.

The tariff system will encourage concentration of industries largely in Gujarat, Maharashtra and Andhra Pradesh at the cost of other states. “The regional (economic) disparities will intensify social problems like Naxalism,” said the CEO, who asked not to be named.

The new tariff system will also affect the government’s efforts to bring down emissions of toxic gases. As per a calculation done by the Standing Conference of Public Enterprises (Scope), a compressed natural gas (CNG) station in Gujarat will be paying about $0.4 per unit transportation tariff for gas produced from the Western coast, whereas it will swell by 8 times for a CNG station in Punjab.

The government has fixed a price of $4.2 per unit of KG-D6 gas at Kakinada, where the deepwater gas is first collected and piped throughout the country.

Furthermore, a CNG station or a PNG user would be required to pay additional city gas distribution network tariff also, thereby making the gas expensive for retail users in these states,” said an industry analyst.

At present, the country has seven major gas transmission pipelines and seven regional networks. GAIL India is the largest gas transportation company in the country. Other pipeline operators are Gujarat State Petronet Ltd, Gujarat Gas Company Ltd, Reliance Gas Transportation Infrastructure Ltd, Indian Oil Corporation, and Assam Gas.