| Date | Version | January 18, 2021 | 1.0 |
| Keywords | PNGRB, Natural Gas Pipeline, Pipeline Tariff, Unified Tariff, National Gas Grid System |
| List of Legislation Referred |
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| Jurisdiction | India |
Introduction
This write-up provides an overview of the Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Second Amendment Regulations, 2020, which introduced the concept of a Unified Tariff for the National Gas Grid System in India.
In a Nutshell
- Shippers are required to pay the Invoicing Entity based on a Unified Tariff for the total quantity of gas delivered through pipelines forming part of the National Gas Grid System.
- The Invoicing Entity remains entitled to revenue based on its Approved Tariff.
- Since revenue collection is based on Unified Tariff while entitlement is based on Approved Tariff, a settlement mechanism among pipeline entities has been introduced.
- Pipeline entities are obligated to periodically furnish operational and tariff-related information to the PNGRB.
Unified Tariff
The Amendment Regulations require invoicing entities to collect tariff from shippers based on the Unified Tariff rather than individual pipeline tariffs.
The Unified Tariff is determined annually by the PNGRB for the National Gas Grid System and is calculated using a formula that considers approved tariffs, estimated gas volumes, ship-or-pay quantities and adjustment factors.
The objective is to simplify tariff structures, promote transparency and facilitate seamless transportation of natural gas across interconnected pipeline networks.
Invoicing Entity
An Invoicing Entity refers to an authorised entity responsible for laying, building, operating or expanding a natural gas pipeline forming part of the National Gas Grid System.
The Amendment Regulations extend their applicability to certain entities authorised by the PNGRB pursuant to policy directives of the Central Government and other specified authorisations under the pipeline regulations.
National Gas Grid System
The National Gas Grid System consists of interconnected natural gas pipelines across India, including partially commissioned interconnected pipelines listed under Schedule C of the Regulations.
The PNGRB retains the authority to amend Schedule C and expand the scope of the National Gas Grid System from time to time.
Settlement Mechanism
The Amendment Regulations provide for periodic settlement among pipeline entities to reconcile differences between:
- Revenue entitlement based on Approved Tariff; and
- Revenue collected based on Unified Tariff.
This mechanism ensures that pipeline operators receive their approved revenue while maintaining a simplified tariff structure for shippers.
Obligations of Pipeline Entities
Pipeline entities are required to periodically provide detailed information to the PNGRB, including:
- Approved tariff details.
- Actual volumes of gas transported.
- Ship-or-pay quantities.
- Calorific values and transportation data.
- Rolling estimates for future gas transportation volumes.
- Reasons for material deviations between estimates and actual performance.
- Any additional information required by the PNGRB.
Concluding Thoughts
The introduction of a Unified Tariff framework represents a significant step towards the development of a fully integrated National Gas Grid and supports the Government of India’s objective of increasing the share of natural gas in the country’s energy basket.
The reforms are expected to improve transparency in tariff determination, facilitate efficient utilisation of pipeline infrastructure, promote competitive gas markets and complement initiatives such as the Indian Gas Exchange (IGX) in fostering a robust gas trading ecosystem.
