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Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008

Published vide Notification No. G.S.R. 807(E), dated 20th November, 2008

Last Updated 4th April, 2023 [act2582]

Petroleum and Natural Gas Regulatory Board

(a) "Act" means the Petroleum and Natural Gas Regulatory Board Act, 2006;

(b) "appointed day" means the date of October 1, 2007;

[(ba) "approved tariff" means zone-wise natural gas pipeline tariff determined under regulation 4 or zone-wise tariff as per regulation 11 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008;]

(c) "Board" means the Petroleum and Natural Gas Regulatory Board established under sub-section (1) of section 3 of the Act;

(d) "capacity of natural gas pipeline" [for the purpose of determining natural gas pipeline tariff under Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008 shall be the authorized capacity as defined in the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008.

Provided further that entity shall submit the revised capacity of the natural gas pipeline, if any as may be necessary, in terms of clause (g) of sub regulation (5) of regulation 5 of Petroleum and Natural Gas Regulatory Board (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010. Such revised capacity or as modified in terms of clause (g) of sub regulation (5) of regulation 5 of Petroleum and Natural Gas Regulatory Board (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010, shall be considered for the tariff determination after its approval by the Board.]

[(da) "Imbalance Management Services" shall have the same meaning as assigned to it in the Petroleum and Natural Gas Regulatory Board (Imbalance Management Services) Regulations, 2016;]

(e) "initial unit natural gas pipeline tariff" means the unit natural gas pipeline tariff determined for a period commencing from -

(i) the date of commissioning of the natural gas pipeline in any financial year and ending on the last day of that financial year in case the natural gas pipeline is commissioned on or after the notification of these regulations; or

(ii) the date of coming of the natural gas pipeline within the purview of these regulations in any financial year and ending on the last day of that financial year in case the natural gas pipeline is commissioned before the notification of these regulations:

[(ea) "invoicing entity" means [one or more authorized entities laying, building, operating or expanding natural gas pipeline(s) constituting part of national gas grid system and which raises the invoice on the shipper(s) for the Unified Contractual Path];

[(eaa) "integrated natural gas pipeline" for the purpose of tariff means such pipeline(s) of following categories which are directly interconnected (including those which may be partly commissioned and so interconnected) as may be submitted by an entity as an integrated natural gas pipeline and as may be enlisted under the tariff order by the Board:

Explanation 1: An integrated natural gas pipeline shall have the same meaning as a natural gas pipeline.
Explanation 2: The Board shall adopt public consultation process as per the provisions as specified in regulation 4 of these regulations and thereupon take a decision in respect of such enlistment so as to achieve one or more of the following objectives:

(a) the factors which may encourage consumption of natural gas in far-flung areas;

(b) safeguarding consumer interest and at the same time recovery of cost of transportation in a reasonable manner;

(c) securing equitable distribution of natural gas;

(d) to ensure simplification, stability and predictability in determination and simplification of tariffs;

(e) minimizing the impact of additive transportation tariffs vis-à-vis tariff of integrated natural gas pipeline.

Explanatory Memorandum: - "Integrated natural gas pipeline for the purpose of tariff and other related regulatory provisions under this amendment are a part of regulatory reform process for rationalization of tariffs. In this regard:

1. Para 14 of the Policy for Development of Natural Gas Pipelines and City or Local Natural Gas Distribution Networks of the Government of India notified on 20.12.2006 in the Gazette of India, Extraordinary, Part-I Section 1 with F. No. L-12022/1/03-GP (Pt. II) has envisaged facilitating the creation of a National Gas Grid.

2. The PNGRB Report titled '2030-Natural Gas Infrastructure in India' has also envisaged switching over to a mature tariff system inter-alia for providing access to customers located in geographically disadvantaged locations.

3. For avoidance of applicability of multiple additive pipeline tariffs of a single entity, provision for integrated natural gas pipeline for the purpose of tariff is being considered by the Board so that the same would be used as a building block towards achieving the goal of simplification and more stable unified tariff.]

(eb) "MMBTU" means million British Thermal Units on gross calorific value ("GCV") basis;

(ec) "national gas grid system" means network of all such natural gas pipelines within India which are fully interconnected with each other (including those which are partly commissioned and so interconnected) and as enlisted in Schedule C to these regulations and the Board may, by order, amend the said Schedule C from time to time;]

(f) "natural gas pipeline" means [as defined under the Petroleum and Natural Gas Regulatory Board (Authorizing Entities for Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008.]

(g) "natural gas pipeline tariff" means the unit rate of tariff for a natural gas pipeline (excluding statutory taxes and levies) in rupees per million British Thermal Units (Rs./ MMBTU) for transport of natural gas;

[(h) "tariff review" means the review of the unit natural gas pipeline tariff after every five consecutive years by the Board with the first tariff review to be done after the end of five consecutive years after the end of the initial unit natural gas pipeline tariff period as specified under clause (e):

Provided also that the tariff review can be done earlier in terms of provisions of sub-clause (9) of clause 9 of Schedule A.]

[(ha) "Settlement Mechanism" means a mechanism enlisted as Schedule D which may be framed by the Board from time to time in consultation with pipeline entities as detailed at Schedule C.]

[(i) "tariff zone" means the zone-

[(j) "tariff zones for unified tariff" means the -

(i) first tariff zone for unified tariff of a length of three hundred kilometres from the unified entry point on either side of the national gas grid system; [***]

(ii) [second tariff zone for unified tariff of a length of more than three hundred kilometers and upto twelve hundred kilometers on either side of the first tariff zone of national gas grid system, or]

[(iii) third tariff zone for unified tariff being the remaining length of the national gas grid system on either side of second tariff zone for unified tariff;]

[(ja) "transmission loss" means as defined in regulation 2(1) of Petroleum and Natural Gas Regulatory Board (Access Code for Common Carrier or Contract Carrier Natural Gas Pipelines) Regulations, 2008.]

(k) "unified tariff" means unit natural gas pipeline tariff, in respect of the national gas grid system determined in accordance with regulation 5A, for transportation of natural gas (excluding statutory taxes and levies) denominated in rupees per MMBTU;

[(l) "unified contractual path" means the route on the national gas grid system between the unified entry point and the unified exit point for the shipper(s); Provided that the Unified Contractual Path is to be confirmed by the shipper(s) at the time of capacity booking(s) and agreed by the transporter(s). Provided further that in case there are multiple shippers involved in transportation of gas on the Unified Contractual Path, details of all such shippers shall also be confirmed at the time of capacity booking and accepted by the transporter(s).]

(m) "unified entry point" means the point on the national gas grid system where a shipper injects natural gas [which shall be confirmed by the shipper at the time of capacity booking and agreed by the transporter(s)];

(n) "unified exit point" means the point on the national gas grid system from where a shipper evacuates natural gas [which shall be confirmed by the shipper at time of capacity booking and agreed by the transporter(s).]]

(1) authorized by the Central Government [before the appointed day] under regulation 17 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008 for laying, building, operating or expanding a natural gas pipeline [***];

(2) laying, building, operating or expanding a natural gas pipeline before the appointed day and authorized by the Board for such activities under regulation 18 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008; and

(3) laying, building, operating or expanding a dedicated pipeline which is converted into a natural gas pipeline under the provisions of sub-regulation (1) or (2) of regulation 19 of Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008.

[(4) authorized by the Board pursuant to a policy directive issued by the Central Government under sub-section (2) of section 42 of the Act;

(5) authorised by the Board under regulation 9 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008 and whose tariff is fixed under regulation 11 of the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008, for the limited applicability of unified tariff in accordance with regulation 5A.]

(1) is not in operation, then at least six months before the likely date of commissioning of the natural gas pipeline, or within ninety days of the date of notification of these regulations, whichever is later; or

(2) is already in operation, then, in relation to an entity referred to in -

(a) [sub-regulation] (1) of regulation 3, within ninety days of the notification of these regulations;

(b) [sub-regulation] (2) of regulation 3, within ninety days of the grant of authorization by the Board; or

(c) [sub-regulation] (3) of regulation 3, within ninety days of the date of authorization by the Board:

[(d) sub-regulation (4) of regulation 3, within ninety days of the date of acceptance by the Board;

(e) sub-regulation (6) of regulation 3, within ninety days from the date of submission of request for integrated natural gas pipeline.]

Provided that the entity shall charge initial unit natural gas pipeline tariff "on account basis" based on these regulations from the date of commissioning of natural gas pipeline referred to in [sub-regulation] (1) of regulation 3 or the date of authorization [or acceptance] by the Board of natural gas pipeline referred to in clause (2) [,] clause (3) [or sub-regulation (4)] of regulation 3, as the case may be, till the date the Board provisionally fixes the initial unit natural gas pipeline tariff:

[Provided further that the initial unit natural gas pipeline tariff [as applicable to sub-regulation (1) to sub-regulation (4) of regulation 3] shall be provisionally fixed by the Board within six months of receipt of the relevant tariff data from the entity after which the entity shall carry out adjustments with a retrospective effect with the customers for the difference between the initial unit natural gas pipeline tariff that the entity had so charged and that provisionally fixed.]

Schedule A

[see regulations 4 and 5]

Procedure for determination of natural gas pipeline tariff.

Note: - The pre-tax rate of return on capital employed shall be computed by grossing-up twelve percent by the nominal rate of income tax applicable for corporate assesses as per the provisions of the Income Tax Act, 1961, as amended from time to time.

(a) treatment of an investment in the fixed asset in determination of total capital employed shall be as per the basis indicated in Attachment 2;

(b) capital costs in similar projects, if any, elsewhere in India benchmarked on a "like-to-like" basis;

(c) appropriateness of the pipeline design and the operating philosophy with regards to maximum allowable operating pressure;

(d) optimization of the equipments and facilities such as, compressors, metering systems, SCADA, fire fighting required, based on an assessment of the appropriate available technology;

(e) spur lines;

(f) design parameters for compressors; and

(g) assessment of the costs of major equipments and facilities in the natural gas pipeline, laying or building costs, project management consultancy and pre-operative expenditure.

(1) consumables;

(2) utilities -

(a) power;

(b) fuel (including the cost of natural gas and the natural gas pipeline tariff [thereon, corresponding to the volumes of natural gas considered as divisor for tariff determination subject to maximum of 2% of the volumes of natural gas considered as divisor for tariff determination of the natural gas pipeline).]

[Explanation: - Actual fuel cost for the respective years shall be multiplied by the volumes considered as divisor for determining tariff and divided by actual volumes flow.]

(c) water;

[(d) transmission loss @ 0.1% of the actual volume, multiplied by the gas price plus applicable transmission charges.

Provided further that the gas price used for calculation of transmission loss shall be the gas price ceiling issued by Petroleum Planning & Analysis Cell in accordance with Ministry of Petroleum and Natural Gas, Govt of India, Notification No.O-22013/27/2012-ONG-D-V (Vol-II) dated 21.03.2016 for marketing including pricing freedom for gas being produced from discoveries in Deepwater, Ultra Deepwater and High Pressure-High Temperature areas or actual gas price, whichever is lower for the respective period.]

(3) salaries and wages;

(4) repairs and maintenance;

(5) insurance premia on assets (excluding the value of loss of profit) and on line-pack volumes;

(6) administrative overheads [to the extent not classifiable under sub-clause (1) to sub-clause (5)], related and also commensurate to the level of operations in the natural gas pipeline;

[***]

[(8) [Adjustment of Miscellaneous income against Operating Costs: Financial Year-wise actual revenue earned by the entity from the regulated asset base, including] Miscellaneous income realizable from a fixed asset included in the capital employed or out of an expense considered as an operating cost, including income from imbalance management services in accordance with the provisions of Petroleum and Natural Gas Regulatory Board (Imbalance Management Services) Regulations, 2016, but excluding interest income, profit or loss on sale or transfer of any fixed or other asset, shall be [worked out. If considering such actual revenue, return earned by the entity on the date of review results in more than the allowed rate of return as per clause 3 of Schedule A, then adjustment would be made in the tariff to make the return earned by the entity on the date of review equals to the allowed rate of return as per clause 3 of Schedule A.]]

(a) The divisor for each [phase of natural gas pipeline for the first ten years of its operations or any subsequent expansion in the capacity (other than expansion to which clause 6 (1) (c) is applicable) shall be arrived by multiplying the applicable percentage utilization for the year, as per the basis indicated below, with seventy five per cent of the capacity of each phase of natural gas pipeline or of natural gas pipeline or each expansion of capacity, as the case may be:

(b) The divisor for the [eleventh and the subsequent years of operation of each phase of natural gas pipeline or of natural gas pipeline or each expansion of capacity, as the case may be (other than expansion to which clause 6 (1) (c) is applicable) shall be equal to the seventy-five per cent of the capacity of natural gas pipeline or actual volumes (including ship or pay volumes)], whichever is higher.]

[(c) Notwithstanding anything contained in any other regulations, in case of addition of any new natural gas source to a natural gas pipeline which comes anytime from 01.04.2020 and onwards, any increase in the capacity of the pipeline, if any, because of such addition of such new source shall not be considered in the tariff determination for a period of five years from the date of commissioning of the pipeline connectivity due to the relevant source.

(d) It is clarified that any new injection point on a common carrier or contract carrier natural gas pipeline due to interconnection from another common carrier or contract carrier natural gas pipeline shall not be considered as capacity expansion for determination of tariff. Provided that the entity has taken approval wherever required in terms of Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural Gas Pipelines) Regulations, 2008 along with the increase in capacity due to such interconnection as per Petroleum and Natural Gas Regulatory Board (Determining Capacity of Petroleum, Petroleum Products and Natural Gas Pipeline) Regulations, 2010.]

[(e) ***]

(a) determination of the provisional unit natural gas pipeline tariff by considering the weighted average of heat value of different natural gases which are likely to be transported by the entity during this period;

(b) determination of the final initial unit natural gas pipeline tariff by considering the weighted average heat value of the natural gas delivered to customers during the initial unit natural gas pipeline tariff period;

(c) first tariff review by considering the weighted average heat value of natural gas delivered to the customers between the period from the end of the initial unit natural gas pipeline tariff period and the due date of the first tariff review;

(d) any subsequent tariff review by considering the weighted average heat value of the natural gas delivered to the customers during the period between that tariff review and the immediate previous tariff review.

(a) the period of initial unit natural gas pipeline tariff;

(b) the first five and consecutive years after the end of the initial unit natural gas pipeline tariff; and

(c) the period between any two consecutive tariff reviews.

(a) the period applicable for the initial unit natural gas pipeline tariff;

(b) the period of five consecutive years after the end of the initial unit natural gas pipeline tariff; and

(c) the period between any two consecutive tariff reviews.

[Provided that, for a period of five years or for the period between any two consecutive tariff reviews as the case may be, in order to protect the interest of consumers, in place of a levelized tariff, the DCF model for tariff computation may provide for a gradual annual increase in the levelized tariff at a pre-specified rate as may be approved, by order, by the Board after adopting public consultation process in this regard as per the provisions as specified in regulation 4 of these regulations. Accordingly, a gradually increasing year-wise zonal tariff shall be charged based on such pre-specified rate.]

(2) The initial unit natural gas pipeline tariff including its apportioning over all tariff zones shall be determined based on provisional computations.

(3) The final computations in respect of the initial unit natural gas pipeline tariff shall be made considering the adjustments [as required for the actual capital, operating costs and volumes as specified under clause 4, 5 and 6;]

[(4) The adjustment on account of variation in the provisional initial unit natural gas pipeline tariff, final initial unit natural gas pipeline tariff and tariff determined under tariff review shall be made in the DCF calculations and the derived tariff shall be charged from the customers on prospective basis till next review, that is, the tariff shall be applicable from the first day of the month, following the month, in which the tariff order (zonal tariff in case of applicability of zonal tariff) is issued by the Board.]

(5) The final unit natural gas pipeline tariff as specified under sub-clause (3) shall apply for the period upto the first tariff review until the time the same is revised by the Board;

(6) The entity shall submit for Board's approval the data for determination of the unit natural gas pipeline tariff after the notification of these regulations in the form and time frame specified under regulation 5 alongwith the provisional computations of the initial unit natural gas pipeline tariff including the apportioning of the same over all tariff zones;

Provided that the final computations of the initial unit natural gas pipeline tariff including apportioning of the same over all tariff zones shall be submitted three months before the last date of the period applicable for the initial unit natural gas pipeline tariff.

(7) The entity shall submit computation of the unit natural gas pipeline tariff including apportioning of the same over all tariff zones in the form specified under regulation 5 at the time of each tariff review within three months of the-

(a) end of the last year of the five consecutive years after the initial unit natural gas pipeline tariff; or-

(b) end of the preceding tariff review period:

Provided that the computation shall consider the actual cost, financial and operational data or that normatively assessed by the Board, whichever is lesser as per clauses 4 and 5 in respect of the period specified under sub-clause (a) or (b), as the case may be.

(8) [Adjustments on account of the variations with respect to actuals in the capital, operating costs and volumes as specified under clause 4, 5 and 6, during the five consecutive years after the initial unit natural gas pipeline tariff or any tariff review shall be made in the DCF calculations in respective years as required.]

(9) The Board may, either on its own or on the entity's request, carry out a review of the unit natural gas pipeline tariff any time between two tariff reviews, as the case may be, considering-

(i) applicable nominal rate of income tax used for grossing-up the rate of return on capital employed;

(ii) sudden change in any parameter used in the determination of the unit natural gas pipeline tariff.

(10) The provisional and final initial unit natural gas pipeline tariff, unit natural gas pipeline tariff for the period of five consecutive financial years after the initial unit natural gas pipeline tariff and the unit natural gas pipeline tariff fixed after any tariff review thereafter shall continue to apply till the time the same is revised by the Board.