PNGRB simplifies gas tariff structure, unified reduces zones from three to two
Previously, India's gas grid operated with three tariff zones based on distance from the gas source: Zone 1 (up to 300 km), Zone 2 (300 km to 1,200 km), and Zone 3 (beyond 1,200 km). While a uniform tariff was applied within each zone, successive zones incurred higher tariffs to account for longer transportation distances. This move is part of the recently approved amendments to the Natural Gas Pipeline Tariff Regulations, 2025. Another amendment is the nationwide application of the Unified Zonal Tariff of Zone 1 to Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) domestic segments, regardless of their distance from the gas source. This move is anticipated to make natural gas more affordable for millions of urban households and strengthen transport networks, thereby directly supporting the wider adoption of cleaner energy. As of December 2024, India boasts 7,395 CNG stations and 14 million PNG domestic connections, all poised to benefit significantly from this cost reduction.
The PNGRB has introduced the PDR model to fund pipeline infrastructure expansion. Pipeline entities exceeding 75% utilization contribute 50% of their net-of-tax earnings to the PDR, which is reinvested into infrastructure development. The remaining 50% is passed on to consumers through tariff adjustments. This performance-linked model creates a win-win situation for pipeline entities and consumers, supporting sustainable infrastructure development and enhancing pipeline network capacity.
'To further stabilise tariffs and enhance supply efficiency, the PNGRB has introduced an efficient fuel procurement mandate. Under this mandate, pipeline operators are now required to procure a minimum of 75% of their annual system-use gas through long-term contracts of at least three years. This measure is designed to mitigate procurement risks, lower transaction costs, and ultimately ensure more predictable and affordable tariffs for both consumers and investors,' said Rajesh Kumar Mediratta, managing director & CEO, Indian Gas Exchange (IGX).
Manas Majumdar, Partner and Leader Oil & Gas - PwC India said that the updated unified pipeline tariff policy is a welcome move by PNGRB. 'We expect it to help streamline gas consumption for both marketers and end-users, as the 2-zone tariff will help simplify the transportation tariff process. Further CGD companies will benefit with tariff zone1 being applicable to them nationwide and in general end-users will get more affordable gas access,' said Majumdar.
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