Handed a one-two on its solar plexus in the form of a massive 60% tariff slash by the PNGRB, IGL moved the court challenging the regulator’s constitutionality and legality of its powers.
Handed a one-two on its solar plexus in the form of a massive 60% tariff slash by the Petroleum and natural Gas Regulatory Board (PNGRB), a staggering Indraprastha Gas Ltd moved the Delhi High Court on Tuesday challenging the regulator’s constitutionality and legality of its powers.
“We are not clear how they (PNGRB) have calculated this tariff. We do not know the assumptions made,” said M Ravindran, managing director, IGL, at a press conference.
A joint venture of GAIL (India) Ltd, Bharat Petroleum Corp and the state government of New Delhi, IGL sells auto and cooking gas in New Delhi and adjacent areas.
While IGL is the first to be impacted by this order, industry experts said other (listed and private) players such as Gujarat Gas, Mahanagar Gas, Petronet LNG and Adani Gas are also likely to feel the heat.
Rohit Nagraj, senior research analyst at Centrum Broking, said in a note the move will certainly put pressure on peers “as their tariffs will also be reviewed and revised based on the parameters used for ordering the price cut for Indraprastha”.
Dhaval Joshi and Jagdish Meghnani, analysts with Emkay Global Financial Services Ltd, said in a note the order, if Implemented, would result in private players staying away from city gas distribution. “In the current scenario, only public sector units will be the key players which would run the business with regulated margins,” they said.
The PNGRB order is expected to bring down the price of compressed natural gas in the capital by 20% and piped natural gas by 10%.
The new tariffs are applicable for five years, and have been fixed retroactively from April 2008 (at levels lower than what IGL had been charging) and the PNGRB has also ordered the company to refund the difference of about Rs1,600 crore to customers.
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