GAIL’s Rs 20 hike in tariff will translate to Rs 3,400 crore per annum: Sandeep Kumar Gupta
How do you see the proposed tariff changes by PNGRB and how does GAIL benefit from this?
Sandeep Kumar Gupta: The public consultation document which has been floated by PNGRB proposing certain changes in the regulation covers two-three main changes. First, there will be only two zones instead of the three zonal tariffs presently available and the silver lining is that for all CGDs, for their domestic PNG and CNG volumes, only zone one tariff will be applicable. This will be a big positive for GAIL which is present in 72 geographical areas out of the total 307 geographical areas.
The second change pertains to the isolated networks where presently the normative capacity is reckoned for the purpose of tariff determination, whereas the actual volumes are much lower. So, the change proposed is that the actual volumes will be considered. This again will be very positive for our isolated networks in Agartala, in Cauvery basin, in Gujarat region and we expect that about 130 crore per annum will be a benefit out of that.
The third change pertains to the retention of 50% benefit of the excess utilisation beyond the 75% normative capacity where again our HVJ pipeline, which is nearing reaching 75% capacity utilisation will benefit in the future years. But the biggest development is an advanced stage of our revision, integrated tariff revision, for which we filed the application for increase from 58 rupees 61 paisa per MMBTU to 78 rupees, we filed this on August 24 and that is nearing completion and we are very hopeful that in the next monthly meeting of PNGRB that should get approved.
The Rs 20 increase in the tariff which we have filed translates to Rs 3,400 crore per annum and we are very hopeful that at least two elements out of this, – Rs 1200 crore for true up-of-the-system use gas cost and about Rs 800 crore due to the APM price deallocation and the capacity determination these Rs 2,000 crore is certain. We expect that this development should be there in the next month itself.
Do you think this consultation paper will see a decision by next month itself?
Sandeep Kumar Gupta: No, there are two things: one, the PCD for the tariff regulation changes may take some time; but the second aspect is our application which was filed on August ‘24 for integrated tariff revision, should see finality in the next year.
Given that there is a high demand when you talk about the CGD, the power and the industrial sector, if you could help us understand how much of this demand are you expecting to go ahead and increase the gas supply in the coming years?
Sandeep Kumar Gupta: The CGD volumes are increasing and they are growing at a CAGR of 12% to 15% and with more and more geographical areas now attaining maturity, some were lately authorised, these volumes will definitely grow year on year. The second is that with completion of many pipelines, like Barauni-Guwahati got commissioned, IGGL first phase got commissioned recently, GAIL’s Srikakulam-Angul pipeline got commissioned. This year, we are commissioning our Mumbai – Nagpur -Jharsuguda -Jabalpur pipeline, Kochi -Koottanad- Bangalore- Mangalore pipeline.
So, with commissioning of all these pipelines, the connectivity to the refineries and to the CGD network will increase and this will see a robust volume growth. We anticipate a 8-10% increase in our transmission volumes on an annual basis and with the tariff increase and the increased volumes, this augurs very well for the company.
The other thing I wanted to talk about is also your diversification when it comes to petchem product mix. What is the product mix for the company going to look like going forward and how much percentage will be towards ethylene and derivatives going forward?
Sandeep Kumar Gupta: We presently have 810 kTA capacity at our Pata plant, which produces polyethylene. We are putting up a 60 KTA facility for producing polypropylene. We are already marketing polypropylene for our group company BCPL. Besides that, we are putting up a 500 KTA polypropylene plant to propane dehydrogenation, which is the country’s first at Usar, which should get commissioned this year. Besides, the acquired PTA plant at Mangalore, which will produce 1.25 million tonnes of PTA, will also get commissioned this year. So, put together, we will have about 3-million-tonne capacity of petrochemicals, which all should come on stream this year. So, portfolio-wise, we will be well diversified, producing polyethylene, polypropylene, PTA as well as marketing for BCPL.
You did speak about the fact about the integrated tariffs that you have submitted a proposal for about Rs 20 per MMBTU hike in that one. If you could help us understand and you did say that you are expecting some sort of a move on that very soon. If you could help us understand, what sort of a hike are you pencilling if it is agreed upon?
Sandeep Kumar Gupta: What we filled is a Rs 20 increase, which translates to Rs 3,400 crore per annum and out of that there are certain things which are futuristic like future cost and future capex, which are filed as a system because it is on a DCF model, but even if the future things are ignored, we are very hopeful that at least Rs 12 per MMBTU should get approved, which should translate to about Rs 2,000 crore plus per annum.
If you could give us an outline of what the company is planning when you talk about capacity addition and also the capex that you have lined up for that.
Sandeep Kumar Gupta: The petrochemical capacity I just mentioned. Besides that, we are commissioning these pipelines and that will increase the capacity and most of the projects are getting commissioned this year. Going forward, we will have that Gurdaspur-Jammu pipeline on which the work is going on. Besides, we have certain captive pipelines like C2, C3 pipelines from Vijaipur to Pata, which we are working upon, it is getting constructed and we will have a net zero capex.
As you are aware, we advanced our net zero target from 2040 to 2035, which entails a total expenditure of Rs 38,000 crore and we should be spending about Rs 3,000- 4,000 crore per year since we have to complete the net zero by 2035. These will broadly be capex. Besides that, we are seeking authorizations for new natural gas pipelines, some of which are stranded and not completed by other companies and also there is a plan for nine LPG pipelines and considering that our presence in LPG pipelines is the oldest in the country, through Jamnagar-Loni and Vizag-Secunderabad pipelines, we will be bidding for LPG pipelines also. All these will entail our future capex and we hope that our future capex will also be in line with the present trend of Rs 8,000-10,000 crore per annum.
