Reliance Pushes for Rail-Linked Pipeline Tariffs; Other OMCs Seek Higher Escalation Rates

A recent stakeholder meeting hosted by the Petroleum and Natural Gas Regulatory Board (PNGRB) regarding draft regulations for petroleum product pipeline tariffs sparked debate among oil marketing companies (OMCs).

Reliance Opposes Annual Escalation

Reliance Industries, a major player in the Indian oil and gas sector, stated its disapproval of the proposed annual escalation of 3.4% for pipeline tariffs. Instead, Reliance supported linking pipeline tariffs directly to railway freight rates. Their reasoning is that with the proposed annual increase, pipeline tariffs could surpass rail rates by 2029, disincentivising the use of pipelines over railways. Reliance suggested setting pipeline tariffs at 75-80% of rail tariffs to maintain competitiveness.

Divergent Opinions from Other OMCs

Hindustan Petroleum Corporation Limited (HPCL) expressed concerns that the proposed 3.4% escalation could lead to insufficient revenue to cover investments and operational costs. HPCL proposed a higher escalation rate of 5%.

GAIL (India) Limited, the country’s largest gas pipeline operator, offered a different perspective. They suggested aligning the escalation rate for petroleum product pipelines with the existing 4.5% rate for natural gas transmission tariffs. Alternatively, GAIL proposed linking the rate to the Wholesale Price Index (WPI) averaged over the past five years.

Indian Oil Raises Concerns on Transportation Loss

Indian Oil Corporation (IOCL) highlighted another point of contention. The draft regulations propose a transportation loss of 0.05%, which IOCL believes is lower than the actual loss experienced. They urged the PNGRB to revisit this figure and requested data to support their claim.

PNGRB’s Response

The PNGRB reportedly expressed disappointment regarding the limited data provided by OMCs during the meeting. Despite this, the draft regulations aim to strike a balance – ensuring a reasonable tariff for pipeline companies while protecting consumer interests.

Looking Ahead

The PNGRB is likely to consider the diverse viewpoints presented by OMCs. The finalisation of pipeline tariff regulations will significantly impact the transportation landscape for petroleum products in India. Stakeholders eagerly await the PNGRB’s decision, which will influence investment decisions and overall industry dynamics.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.