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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