labels: industry - general, oil & gas, power, economy - general, gas authority of india limited
GAIL seeks market determined ''grid tariff'' mechanism for gas transmissionnews
Our Corporate Bureau
06 June 2005

New Delhi: GAIL (India) Limited has sought a market determined tariff fixation system for natural gas transmission through grid pipelines. In the recently announced ''gas pricing order'', the government has approved a market related pricing mechanism for gas sold to customers other than those in the power, fertiliser and transportation sectors, the Agra-Ferozabad region and small consumers.

The principle of adopting a market determined price for gas is a paradigm shift in the Indian gas industry. In line with this principle, GAIL feel that it would be appropriate to consider the adoption of a market determined transmission tariff methodology for gas transportation, as well.

The tariff for the existing gas grid pipelines in the country — HVJ pipeline and Dahej-Vijaipur pipeline (DVPL) has already been referred to the ''tariff commission''. Taking the initiative to understand global practices in tariff fixation methodology, GAIL conducted a study of international practices adopted by the UK, USA., Canada, Australia, and shared the findings with the tariff commission to aid in deciding and recommending a tariff methodology for grid pipelines in the country.

These studies throw light on the key elements that drives tariff determination such as economic life, depreciation, rate of return and the methodologies adopted by regulators in developed gas markets. The practice followed in India by the planning commission on these key elements has also been shared with the tariff commission.

While determining tariffs for other sectors, the government has considered fair rates of return such as 14 per cent for power, 12 per cent for fertiliser and 15 per cent for investments in upstream production.

Considering the recent shift towards a market determined pricing for gas, GAIL is hopeful that the tariff commission will take cognisance of the international practices and that of the planning commission while recommending, in its final report, transmission tariffs for natural gas grid pipelines, with reasonable rates of return.


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GAIL seeks market determined ''grid tariff'' mechanism for gas transmission