Lok Sabha Question No. 62 (STARRED), answered on 2018-07-23
Subject: Price/Tariff Formula for LNG
Ministry: PETROLEUM AND NATURAL GAS
Asked by: MOHANBHAI KALYANJIBHAI KUNDARIYA

## LOK SABHA

## STARRED QUESTION NO. 62

## TO BE ANSWERED ON 23.07.2018

## Price/Tariff Formula for LNG

## *62. SHRI KUNDARIYA MOHAN BHAI KALYANJI BHAI:

Will the Minister of PETROLEUM AND NATURAL GAS पेट्रोलियम और प्राक ृ लिक गैस मंत्री be pleased to state:

- (a)  the  details  of  present  price/tariff  fixation  formula  being  followed  by  the  Petroleum  and Natural Gas Regulatory Board (PNGRB) and Gujarat Gas Ltd. for Liquefied Natural Gas (LNG) from the terminal to the end user along with the date on which the same came into force;
- (b) the details of price/tariff fixation formula followed in the past for the purpose;
- (c) the details of criteria and tenure laid down/set for revision of the said tariff formula;
- (d) whether the Government proposes to consider deregulating the LNG distribution sector from terminal  to  end  users  in  Gujarat  allowing  other  Public  Sector  Undertakings  to  make  it  more competitive on the lines of sectors like telecom and electricity for the benefit of the end users; and
- (e) if so, the details thereof and if not, the reasons therefor?

## ANSWER

## MINISTER OF PETROLEUM AND NATURAL GAS (SHRI DHARMENDRA PRADHAN)

(a) to (e) : A statement is laid on the Table of the House.

## STATEMENT  REFERRED  IN  REPLY  TO  PARTS  (a)  to  (e)  OF  THE  LOK  SABHA STARRED  QUESTION  NO.  *62  ASKED  BY  SHRI  KUNDARIYA  MOHAN  BHAI KALYANJI BHAI TO BE ANSWERED ON JULY 23, 2018

(a) Liquefied Natural Gas (LNG) is being imported under open general license on the terms and conditions mutually agreed upon between the buyers and sellers and it is being traded in the country on market based mechanism. As provided under Section 22 of Petroleum and Natural Gas  Regulatory  Board  (PNGRB)  Act,  2006,  through  notified  regulations  dated  20.11.2008, PNGRB is fixing transportation tariff for transportation of re-gasified LNG through transmission trunk pipelines from terminal to end users connected to such trunk pipelines. Gujarat Gas Ltd is a local  distribution  entity  authorized  by  PNGRB  to  lay,  build,  operate  or  expand  City  or  local natural  gas  distribution  networks  in  various  Geographical  Areas  in  various  states  including Gujarat. The provisions of the PNGRB Act, 2006 provides for fixation of the Maximum Retail Price (MRP) for the sale of natural gas to its retail consumers.

(b) Prior to PNGRB, Tariff commission/committees constituted by Ministry were determining  tariff  for  trunk  pipeline  and  few  entities  were  fixing  negotiated  pipeline  tariffs. PNGRB  was  formed  in    2007,  and  also  fixes  the  transportation  tariff  for  trunk  natural  gas pipelines.

(c ) The  details  of  criteria  and  tenure  laid  down/set  for  revision  of  the  set  transmission pipeline tariff formula as per Clause 9 of Schedule A of Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008, dated 20.11.2008 is at Annexure-I.

(d) & (e) At present, there is no pipeline in the country to transport LNG in liquid form from the LNG terminal  to  end  user  directly.  The  LNG  after  regasification  is  being  transported  in  the gaseous state through the trunk gas pipelines from terminals to end consumers of such pipeline. PNGRB  has  notified  the  relevant  regulations  to  transport  the  natural  gas  which  includes  regasified LNG through trunk gas pipelines on common carrier or contract carrier principle at the regulated  tariff  fixed  by  PNGRB.  Further,  the  provisions  of  the  PNGRB  Act  also  provide  to transport  the  natural  gas  including  re-gasified  LNG  through  city  gas  distribution  pipelines  on common carrier or contract carrier principle after the end of exclusivity period.

## ANNEXURE REFERRED IN REPLY TO PART (c) OF LOK SABHA STARRED QUESTION NO. 62  TO BE ANSWERED ON 23.07.2018 REGARDING PRICE/TARIFF FORMULA FOR LNG

## Clause 9 of Schedule A of Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008, dated 20.11.2008

- (1) The unit  natural  gas  pipeline  tariff  shall  be  determined  for  the  natural  gas  pipeline over its economic life and levelized during-
2. (a) The period applicable for the initial unit natural gas pipeline tariff;
3. (b) The  period  of  five  consecutive  years  after  the  end  of  the  initial  unit  natural  gas pipeline tariff; and
4. (c) The period between any two consecutive tariff reviews.
- (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 required for -
7. (a) The  actual  capital  and  operating  costs  or  that  normatively  assessed  by  the  Board, whichever is lower as specified under clause 4 and clause 5;
8. (b) Volume consideration as per item (a) of sub-clause (1) of clause 6; and
9. (c) Volume conversion into its energy equivalence as per item (b) of sub-clause (2) of clause 6.
- (4) The  entity  shall  adjust  with  the  customers,  the  difference  between  the  natural  gas pipeline tariff recovered based on the provisional computation under sub-clause (2) and that recoverable as per the final computation under sub-clause (3);
- (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;
13. 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 -
15. (a) End  of  the  last  year  of  the  five  consecutive  years  after  the  initial  unit  natural  gas pipeline tariff; or
16. (b) End of the preceding tariff review period:
17. 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 following variations during the five consecutive years after the initial unit natural gas pipeline tariff or any tariff review shall be made in the DCF calculations on a prospective basis by considering the remaining period of the economic life of the project, namely:-
19. (a) The variations on account of the actual performance with respect to the capital and operating costs which when compared with the normative parameters identified under clauses 4 and 5;
20. (b) The variations in respect of the volumes under Explanation to sub-item (ii) of subclause (1) of clause 6 and;
21. (c) The variations in the energy equivalence under sub-clause (2) to clause 6.
- (9) The Board may, after 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-
23. (i) Applicable  nominal  rate  of  income  tax  used  for  grossing-up  the  rate  of  return  on capital employed;
24. (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 fixed after any tariff review thereafter shall continue to apply till the time the same is revised by the Board.