PNGRB updates key regulatory policy norms for transporting natural gas

Business Standard

04-07-2025

In a move to further declutter the policy landscape for transporting natural gas, the Petroleum and Natural Gas Regulatory Board (PNGRB) has reduced the number of unified tariff zones in the country to two, down from three.
As part of the Second Amendment to the Natural Gas Pipeline Tariff Regulations, 2025, released on Friday, PNGRB has extended the benefit of the unified zonal tariff of Zone 1 nationwide to compressed natural gas (CNG) and piped natural gas (PNG) domestic segments. This is expected to make natural gas more affordable for urban households and transport networks, thereby supporting broader clean energy adoption.
In 2023, PNGRB implemented the unified tariff (UFT) system to standardise natural gas transportation charges across India's expanding national gas grid. Unified tariffs were calculated using a levelised approach, considering factors like transportation costs and distance. The levelised unified tariff for 2024-25 was Rs 80.97 per million British thermal units (mmBtu). Three zones were notified, with the first zone being up to a distance of 300 km from the gas source, the second between 300–1,200 km, and the third more than 1,200 km.
Now, the regulator has also called for a new pipeline development reserve, to be funded with 50 per cent of the post-tax earnings of operators with high pipeline utilisation (75 per cent). Half of the net-of-tax earnings above this threshold will be reinvested in infrastructure development, while the other half will be returned to consumers via tariff adjustments. This creates a performance-linked, sustainable model for future growth.
"This is a significant step towards enhancing the accessibility of natural gas across the country, especially to far-flung and underserved regions. We believe this reform aligns well with the vision of establishing a single-grid tariff or transitioning to a simpler and more market-friendly entry-exit tariff model,' Rajesh Kumar Mediratta, managing director and CEO of Indian Gas Exchange (IGX), said.
Pipeline operators now have to procure at least 75 per cent of their annual system-use gas through long-term contracts (minimum three years). This is expected to stabilise prices. "We expect the updated unified pipeline tariff policy to help streamline gas consumption for both marketers and end-users, as the two-zone tariff will help simplify the transportation tariff process. Further, city gas distribution (CGD) companies will benefit with tariff Zone 1 being applicable to them nationwide, and in general end-users will get more affordable gas access," Manas Majumdar, partner and leader, oil and gas at PwC India, said.
PNGRB has authorised approximately 33,475 km of the natural gas pipeline network nationwide, with around 24,945 km already operational. The remaining pipelines are at various stages of construction.
In the city gas distribution (CGD) sector, PNGRB has authorised development across the entire country except for islands. According to the Minimum Work Programme, India aims to have 120 million PNG domestic connections and 17,500 CNG stations by 2030. As of December 2024, the country has approximately 7,395 CNG stations and 14 million PNG domestic connections.
Gas consumption in the CGD sector is expected to grow at a CAGR of approximately 10 per cent by 2030. Supporting this growth, the government has given priority allocation of administered price mechanism gas to CNG and PNG domestic customers.