New Pipeline Tariffs Announced by PNGRB to Boost India’s Infrastructure
The Petroleum and Natural Gas Regulatory Board (PNGRB) has updated the tariff rates for third-party users of ‘common carrier’ pipelines. This change aims to improve the financial stability and attractiveness of pipeline infrastructure in India.
New Tariff Categories
The PNGRB has classified pipelines into three categories:
- Non-bid pipelines commissioned before December 20, 2010
- Non-bid pipelines commissioned after December 20, 2010
- Bid-out pipelines authorized before the 2023 amendment
Tariff Details
For pipelines commissioned before 2010, the transportation tariff for petroleum products (excluding LPG) will be 75% of the basic railway freight, and for LPG, it will be 100% of the basic railway freight. These rates will have a one-time escalation of 17% until March 31, 2025, followed by an annual escalation of 3.4% from April 1, 2025.
For pipelines commissioned after 2010, the tariff will be determined using the discounted cash flow (DCF) method, with 12% post-tax returns on capital employed over the pipeline’s economic life.
For bid-out pipelines, the tariff will also be determined using the DCF method with 12% returns over the remaining economic life, considering the Net Fixed Asset (NFA) at the beginning of the 11th year of operations.
Implementation Date
These new regulations will come into effect on August 1, 2024.
Benefits
According to Anil Kumar Jain, Chairperson of PNGRB, this reform will help reduce road congestion, minimize accident risks, and lower pollution from road transport. It will also offer a more economical alternative to road transportation for moving goods, supporting a greener, safer, and more efficient future for petroleum transportation.
Doubts Revealed
PNGRB -: PNGRB stands for Petroleum and Natural Gas Regulatory Board. It is a government body in India that looks after the rules and regulations for the oil and gas industry.
tariffs -: Tariffs are fees or charges that people or companies have to pay to use certain services or goods. In this case, it is the cost to use pipelines for transporting gas or oil.
third-party users -: Third-party users are companies or people who use services provided by someone else. Here, it means companies that use pipelines owned by others to transport their gas or oil.
common carrier pipelines -: Common carrier pipelines are pipelines that can be used by multiple companies to transport their gas or oil. They are like shared highways for gas and oil.
commissioning date -: Commissioning date is the date when a pipeline starts working and is ready to be used. It is like the pipeline’s ‘birthday’.
road congestion -: Road congestion means too many vehicles on the road, causing traffic jams. It makes traveling slow and frustrating.
accident risks -: Accident risks are the chances of accidents happening. More vehicles on the road can lead to more accidents.
pollution -: Pollution is harmful substances in the air, water, or soil. Vehicles on the road produce pollution, which is bad for our health and the environment.