Reliance favors tying of pipeline tariff to rail freight rates

13 Jun 2024 , 03:02 PM

Reliance Industries informed the downstream regulator that it preferred the petroleum products pipeline tariff to be tied to railway freight rates rather than it being increased annually.

During a stakeholder meeting about draft regulations on the determination of pipeline transportation tariff for petroleum and petroleum products, Reliance expressed its opinions. Executives from Indian Oil, Hindustan Petroleum, GAIL, and Reliance BP Mobility Ltd. attended the conference, which was arranged by the Petroleum and Natural Gas Regulatory Board (PNGRB).

According to the minutes of the meeting, PNGRB “expressed displeasure” that oil marketing businesses, who mostly controlled pipelines for petroleum products, “were not supportive” in exchanging data. Despite this, the draft regulations seek to safeguard the interests of consumers while still offering the pipeline companies a fair transit charge.

For pipelines put into service prior to the 2010 PNGRB tariff regulations being published, the draft has suggested a 3.4% annual tariff escalation.

As stated in the meeting minutes, “Reliance pointed out that with the proposed escalation of 3.4% in pipeline tariff, the pipeline tariff will surpass rail tariff by 2029, leaving little incentive for other users to shift to pipelines from rail. Instead of an annual tariff escalation, Reliance suggested to determine the tariff at 75%-80% of the rail tariff.”

However, Hindustan Petroleum (HPCL) recommended a 5% increase, stating that the 3.4% rate may result in “under recovery of investments/operational costs.”

The largest gas pipeline operator in the country, GAIL, recommended that the escalation rate for petroleum product pipelines be set at 4.5%, in accordance with the natural gas transmission tariff, or connected to the wholesale price index of the preceding five years.

Indian Oil Corp. recommended a reconsideration of the proposed transportation loss, arguing that it was less than typical at 0.05%. PNGRB looked for evidence to support the business’s assertion.

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