ARTICLE DETAILS
- Date: January 18, 2021
- Version: 1.0
- Keywords: PNGRB, Natural Gas Pipeline, Pipeline Tariff, Unified Tariff, National Gas Grid System
- Jurisdiction: India
LEGISLATION REFERRED
- Petroleum and Natural Gas Regulatory Board Act, 2006
- Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008
- Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Second Amendment Regulations, 2020
OVERVIEW
The Petroleum and Natural Gas Regulatory Board (PNGRB) introduced the Second Amendment Regulations, 2020 to facilitate implementation of a Unified Tariff mechanism across India’s National Gas Grid System.
The objective of the amendment is to simplify transportation charges, improve transparency and encourage wider utilization of natural gas infrastructure across the country.
Under the new framework:
- Shippers pay transportation charges based on a Unified Tariff.
- Pipeline entities continue to receive revenue based on their Approved Tariff.
- A settlement mechanism reconciles differences between Unified Tariff collections and Approved Tariff entitlements.
KEY HIGHLIGHTS
Unified Tariff Framework
Invoicing entities are required to raise invoices and collect transportation charges from shippers based on the Unified Tariff applicable to gas delivered through pipelines forming part of the National Gas Grid System.
The Unified Tariff applies to:
- Actual quantities of gas delivered.
- Ship-or-Pay quantities.
- Unified contractual paths across interconnected pipelines.
The Unified Tariff is determined annually by PNGRB for the entire National Gas Grid System.
Determination of Unified Tariff
The Unified Tariff is calculated using approved tariffs, estimated transportation volumes, ship-or-pay quantities and adjustment factors for previous period variances.
The methodology seeks to ensure equitable recovery of transportation charges while promoting a single tariff framework across interconnected gas pipelines.
INVOICING ENTITY
An “Invoicing Entity” refers to an authorised entity that lays, builds, operates or expands a natural gas pipeline where gas is evacuated by a shipper at a unified exit point or through a pipeline forming part of the National Gas Grid System.
The amendment extends applicability to entities authorised:
- Pursuant to Central Government policy directives.
- Under the PNGRB Pipeline Authorization Regulations, 2008.
- Whose tariff has been determined under applicable PNGRB regulations.
NATIONAL GAS GRID SYSTEM
The National Gas Grid System refers to a network of interconnected natural gas pipelines across India that are physically connected and capable of transporting gas across multiple pipeline systems.
Pipelines included within the National Gas Grid System are listed under Schedule C of the Regulations and may be amended by PNGRB from time to time.
SETTLEMENT MECHANISM
Since shippers pay transportation charges based on the Unified Tariff while pipeline operators remain entitled to revenue based on Approved Tariffs, a settlement mechanism is required among pipeline entities.
The settlement process ensures that:
- Revenue entitlement is calculated using Approved Tariffs.
- Revenue collection is based on Unified Tariffs.
- Differences are periodically reconciled between participating entities.
This mechanism allows shippers to benefit from a simplified tariff structure without adversely affecting pipeline operators’ revenue entitlements.
Revenue Entitlement
Revenue entitlement of pipeline entities is calculated using actual transported quantities and Approved Tariffs applicable to their respective pipelines.
Pipeline operators therefore continue to recover revenue based on their approved regulatory tariff structure regardless of the Unified Tariff charged to shippers.
Revenue Collected Under Unified Tariff
Revenue collected from shippers is determined using:
- Actual gas volumes transported.
- Ship-or-Pay quantities.
- Unified Tariff applicable to the relevant period.
The difference between revenue collected and revenue entitlement forms the basis of the settlement process among pipeline entities.
OBLIGATIONS OF PIPELINE ENTITIES
Pipeline entities forming part of the National Gas Grid System are required to furnish extensive information to PNGRB on a periodic basis.
Information to be provided includes:
- Approved Tariffs.
- Actual gas volumes transported.
- Ship-or-Pay quantities.
- Calorific values.
- Zone-wise transportation data.
- Future volume estimates.
- Rolling twelve-month forecasts.
Pipeline entities must submit:
- Historical data for the preceding twelve months.
- Monthly actual transportation data.
- Monthly forecast information.
- Explanations for variances exceeding five percent between estimates and actual performance.
Additional information may also be required by PNGRB from time to time.
IMPACT OF THE AMENDMENT
The Unified Tariff framework represents a significant step toward development of an integrated National Gas Grid and a more efficient natural gas market in India.
The amendment is expected to:
- Enhance transparency in transportation charges.
- Improve access to pipeline infrastructure.
- Encourage greater natural gas consumption.
- Facilitate market-based pricing mechanisms.
- Support development of a competitive gas trading ecosystem.
National Gas Market Development
The Unified Tariff initiative aligns with the Government of India’s objective of increasing the share of natural gas in the country’s energy basket from approximately 6% to 15% by 2030.
Combined with other market reforms such as the establishment of the Indian Gas Exchange (IGX), the Unified Tariff system is expected to:
- Enable efficient price discovery.
- Improve market competitiveness.
- Increase liquidity in gas trading.
- Strengthen India’s natural gas infrastructure.
- Promote a robust and transparent gas market.
The introduction of a Unified Tariff across the National Gas Grid marks a major regulatory reform in India’s natural gas sector by simplifying transportation charges, enhancing transparency and supporting the development of a competitive national gas market.
