Introduction to the Pipeline Tariff Reform

In a significant move to enhance the affordability and accessibility of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG), the Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed a major overhaul of the pipeline tariff structure. This proposal aims to reduce costs for consumers by charging city gas entities selling CNG and piped cooking gas at the lowest rates. The reform is part of a broader strategy to boost investments in the gas sector, particularly in isolated and remote areas, and to increase gas consumption across the country.

Background on Pipeline Tariffs

Traditionally, pipeline tariffs increased with distance from the gas source, resulting in higher costs for consumers located farther away. To address this issue, PNGRB introduced a unified tariff system in November 2020, which was implemented on April 1, 2023. The unified tariff divided the pipeline into three zones: up to 300 km, 300 km to 1,200 km, and beyond 1,200 km. However, the new system aims to simplify this further, reducing the zones to two and leveling the playing field for CNG and PNG-domestic customers by charging them the lowest tariff regardless of their location.

Existing Tariff Zones and Proposals

• Existing Zones:
  • Zone 1 (up to 300 km): Charged at 52.5% of the unified tariff.
  • Zone 2 (300 km to 1,200 km): Charged at 75% of the unified tariff.
  • Zone 3 (beyond 1,200 km): Charged at a higher rate.
• Proposed Changes:
  • First Tariff Zone: Will be charged at 66.17% of the unified tariff.
  • CNG and PNG-Domestic Users: Will be charged at the lowest rate, equivalent to the Zone 1 tariff, regardless of their distance from the gas source.

Impact on Consumers and the Industry

Benefits to Consumers

• Cost Reduction: The lowest tariff for CNG and PNG will make these fuels more competitive with liquid fuels like petrol and diesel, potentially leading to cost savings for households and vehicle owners.
• Increased Accessibility: By reducing tariffs for distant locations, the initiative aims to expand the reach of piped gas services, benefiting consumers in remote areas.

Benefits to the Industry

• Boost to Infrastructure Development: The reforms are expected to attract investments in gas infrastructure, especially in isolated areas, facilitating the development of CNG stations and PNG connections.
• Enhanced Efficiency: Promoting the use of natural gas could lead to reduced air pollution, aligning with environmental goals.

Challenges and Future Prospects

Despite these positive steps, challenges such as supply chain discrepancies and regulatory hurdles persist. For instance, India faces a CNG supply shortage, partly due to dwindling domestic natural gas production from legacy fields, which may counteract some of the benefits from tariff reductions[4].

However, PNGRB's vision includes the development of a vast network of CNG stations and PNG connections by 2030. The goal is to have 17,500 CNG stations and 120 million PNG domestic connections across the country, marking a significant increase from the current figures of about 7,395 CNG stations and 14 million PNG connections as of December 2024[3].

Conclusion

The proposed tweaks in pipeline tariffs signify a crucial step towards making natural gas a more viable and affordable option for both domestic use and transportation. By reducing costs for distant consumers and incentivizing infrastructure development, PNGRB aims to drive growth in the sector. This move aligns with broader energy policy goals to increase gas consumption, enhance energy security, and reduce reliance on polluting fuels.

Related Topics and Keywords

• Natural Gas Prices
• CNG Fuel
• Pipeline Tariffs
• Energy Regulation
• PNGRB
• Gas Infrastructure Development