Regulator proposes tweak in pipeline tariffs; CNG and piped gas to be charged lowest rate

PNGRB proposes changes to zonal tariffs for natural gas pipelines to boost gas consumption and infrastructure investments.

In a significant change to regulations, oil and gas regulator PNGRB has proposed a new policy for how tariffs for pipelines carrying gas to users will be determined and proposed charging city gas entities selling CNG and piped cooking gas to households at the lowest rates.

The Petroleum and Natural Gas Regulatory Board (PNGRB) has floated a public consultation document for changing the zonal tariffs levied on pipelines that carry natural gas from fields producing it or from import ports, to users such as power plants that make electricity from it, or fertiliser units that manufacture urea from it, or city gas entities that turn it into CNG for sale to automobiles and pipe it to household kitchens for cooking purposes.

“In yet another far-reaching reform for bringing investments and to increase the gas consumption especially in CNG and domestic piped natural gas (one used in household kitchens for cooking) in the country, PNGRB has brought a proposal for reducing the price of piped natural gas used by domestic consumers and in transport,” the regulator said.

“A public consultation document (PCD) has been webhosted for seeking comments from stakeholders on various aspects of tariff regulations like reducing the unified tariff zones to two from three, levying zone one unified tariff to all the CNG and piped natural gas (PNG)-domestic customers,” it said.

PNGRB regulates the transmission tariffs for natural gas pipelines, and these are fixed to provide a 12% normative return on capital employed. These tariffs, traditionally, were apportioned along the length of the pipeline and increased as one travelled further from the gas source. This resulted in higher tariffs for consumers located at a longer distance from the source.

To resolve the distance-related dislocation in the pricing of natural gas, a unified tariff for all consumers connected to the natural gas grid was proposed in November 2020 and implemented from April 1, 2023.

Against the practice of every incremental 300 km of pipeline from the gas injection point being classified as the successive zone with successively higher tariffs, PNGRB divided the entire length into three zones - up to 300 km, from 300 km to 1,200 km, and more than 1,200 km, with tariffs of 52.5% of unified tariff for Zone 1 and 75% for Zone 2.