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New Delhi: The Petroleum and Natural Gas Regulatory Board (PNGRB) has notified new tariff regulations for petroleum product pipelines, set to take effect on 1 August 2024. The updated framework introduces independent yardsticks for setting pipeline tariffs, moving away from the previous method that was tied to railway freight charges.
The regulations affect three categories of pipelines: those commissioned before 20th December 2010, pipelines commissioned after this date, and bid-out pipelines authorized before the 2023 PNGRB amendment in PPPL authorization Regulations. For the pipelines commissioned before 2010, the transportation tariff for products other than LPG is set at 75% of basic railway freight with a one-time 17% escalation effective until 31st March 2025. Subsequently, from the financial year 2025-26, an annual escalation of 3.4% will be applied based on the 10-year CAGR of the Wholesale Price Index (WPI). For LPG, the tariff remains at 100% of the basic railway freight.
Pipelines commissioned post-2010 will see tariffs determined by the Discounted Cash Flow (DCF) methodology, allowing a 12% post-tax return on capital employed throughout the pipeline’s economic life, consistent with the approach for natural gas pipelines.
For bid-out pipelines authorized prior to the 2023 amendment, the tariff for the first ten years remains as quoted by the authorized entity. After this period, tariffs will be determined based on the DCF method with a 12% return on the Net Fixed Asset value at the start of the 11th year of operations.
Dr. Anil Kumar Jain, Chairperson, PNGRB, emphasized that the reforms are designed to bolster financial stability and attractiveness to enhance pipeline infrastructure growth in India. He highlighted that this strategic move aims to reduce road congestion, accident risks, and pollution, offering a more economical transport alternative and supporting a greener and efficient future in line with the Government of India’s Vision 2070.
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