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APR 14 2012

How the regulator calculated over-charging by Indraprastha Gas

  • Economic Times, ET Bureau / Hyderabad
  • Created: Sat 14th APR 2012

Directed to refund excess tariff; network tariff scaled down to Rs 38.58 an mmBtu from Rs 104.05

The Petroleum and Natural Gas Regulatory Board has followed certified accounting principles for capex to arrive at the network tariff to be charged by Indraprastha Gas.

Network tariff is the average unit rate of tariff for a million metric British thermal units (mmBtu) for all consumers. Consumer tariff includes the cost of purchasing gas, transporting it through the gas network, and distributing and supplying to homes.

The regulator came to a conclusion that Indraprastha had grossly overcharged consumers in New Delhi from April 2008. It has scaled down network tariff from Rs 104.05 to Rs 38.58 an mmBtu. The regulator also found Indraprastha's compression charges to be far higher and lowered it to Rs 2.75 a kg as against Rs 6.66. The regulator has directed the gas utility to refund the excess tariff.

Indraprastha submitted a network tariff of Rs 104.05 an mmBtu for the city gas distribution network of Delhi to the regulator.


Following this, the regulator arrived at a network tariff using a chartered accountant's valuation on depreciation from April 1, 2008.

The regulator lowered the tariff of Rs 104.05 an mmBtu by Rs 22.49, implying that the then tariff should have been Rs 81.56.

Calculating the actual capex up to financial year 2010, the projected and the achieved capex were factored in. The difference was arrived at and deducted from the projections given.

The working was based on the latest purchase orders and work orders for capex and the effect of last-mile connectivity. This deduction further lowered the network tariff by Rs 19.64 to Rs 61.92 an mmBtu.


The regulator considered piped natural gas volumes equal to 22.5 standard cubic m a month for every domestic connection.

It accepted the industrial and commercial volumes as given by Indraprastha. CNG volume was assumed at 43 per cent of the total compression capacity. This led to further reduction in tariff by Rs 16.04 an mmBtu. Consequently, the network tariff stood at Rs 45.88 an mmBtu.

Other expenses such as consumables and repair and maintenance were taken at 2 per cent each of average gross block (average gross assets of Indraprastha).

The increase in gross block was assumed at 4.5 per cent with a proportionate increase in manpower by 3 per cent every year.

Miscellaneous expenditure was escalated at 4.5 per cent. The adjustment for this worked out to be Rs 9.70 an mmBtu and effectively reduced the network tariff to Rs 36.18.

By taking the life span of the network at 25 years the regulator permitted Rs 2.40 an mmBtu addition to the tariff.

The reconciliation of the network tariff after deductions and additions worked to Rs 38.58 as against the Rs 104.05 quoted by Indraprastha.


Indraprastha's submission on compression charges of Rs 6.66 a kg was reduced by 45 paise.

Compression charge for CNG is the charge (excluding statutory levies) in Rs a kg for online compression of natural gas into compressed natural gas (CNG) for dispensing to consumers in a network.

The compression charge was then adjusted for capex up to financial year 2010 and future capex based on purchase orders by 26 paise, taking it to Rs 5.95 a kg.

The compression charge was then adjusted for CNG volumes at 43 per cent of the total compression capacity by Rs1.62 a kg.

The compression charge then stood at Rs 4.33 a kg.

Other operating expenditures such as consumables, inflation, actual salaries, repair and maintenance at 3 per cent and miscellaneous expenditure at 4.5 per cent were factored in. This reduced the compression charges by Rs 1.63 a kg.

Compression charges then stood at Rs 2.7 a kg.

Adjusting the network lifespan of 25 years the regulator said the final compression charges should be Rs 2.75 a kg as against Rs 6.66 submitted by Indraprastha.


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