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Current Affairs

Unified Gas Price system

Date: 15 July 2020 Tags: Infrastructure

Issue

The government is aiming to cut down the cost of transportation of natural gas by setting a fixed tariff for the transportation of natural gas for longer distances to boost gas consumption.

 

Background

 The proposal is part of a larger effort by it to boost the share of natural gas in India’s energy basket from around 6 percent currently to 25 percent by 2030.

 

Details

  • The Petroleum and Natural Gas Regulatory Board (PNGRB) has also published a discussion paper on moving from a system where buyers of gas are charged for every pipeline they use in the system to a single charge across a pipeline network.

  • Tariffs for transportation of gas are set by the PNGRB separately for each pipeline based on the assumptions of volume of gas transported on the pipeline and its operating life aimed at providing the operator a pre-tax return of 18%.

  • Tariffs for pipeline usage are divided into zones of 300km, with the tariff increasing for zones further away from the point where gas is injected. Further, if a buyer needs multiple pipelines even from the same operator, that transport tariff would increase.

  • These tariffs increase the cost for buyers of gas further away from the point of injection of natural gas. All of India’s imported natural gas arrives at terminals on the west coast leading to costs for buyers increasing, the further east they are located.

  • The government is proposing a unified price system with one price for those transporting gas nearby within 300 km and one price for those transporting gas beyond 300km.

  • The move would fix tariff prices within an integrated pipeline network in the country preventing buyers from having to pay charges for the use of multiple pipelines.

  • The cost of gas transportation for oil marketing companies such as Indian Oil corporation and fertiliser plants that are closer to the points of gas injection may go up if the government lowers rates for transportation of gas to areas farther away from points of supply.

  • The government is also expecting that as India boosts gas imports, it will be able to negotiate better prices on gas imports.