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Service tax on gas transportation may jack up CNG, PNG prices

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Joydeep Ray Ahmedabad
A hike in the price of natural gas is also expected to hit industries, mainly power and fertilisers, which are bulk buyers.
 
With ST to be levied on gas transportation and sparing levying ST on regassification of liquefied natural gas (LNG), Petronet LNG Ltd (PLL) got much relief, which has been running the country's sole LNG terminal at Dahej in Gujarat.
 
"The prices of CNG and PNG is cities such as Ahmedabad, Vadodara and New Delhi are expected to be revised soon as the CNG/ PNG sellers now will have to bear an additional burden of 10 per cent ST levy. In cities such as Surat and Ankleshwar, where Gujarat Gas Company Ltd (GGCL), a subsidiary of British Gas, has been selling CNG and PNG, prices would not be hiked while natural gas buyers on both sides of the Hazira-Bijapur-Jagdishpur (HBJ) pipeline may have to bear the brunt of this new ST rules," said a source close to GAIL India.
 
GAIL is soon to start construction of the Dahej-Uran Pipeline (DUPL), and industrial units which have already entered into gas purchase agreement with GAIL might face a revision in gas prices as GAIL would be charging 10 per cent ST on the billed amount for transportation of natural gas.
 
"At present, GAIL charges around Rs 1,150 as transportation cost for each thousand cubic metre of gas transported from Hazira through HBJ pipeline, and this will rise upto Rs 1,265 from April, thus the cost of each thousand metre cubic natural gas will rise by at least Rs 100 from the existing Rs 2,850 per thousand metre cubic. Companies such as Essar Power, Essar Steel, Kribhco, Iffco will have to bear additional cost for buying gas and similar will be the effect on the gas buyers who have entered into agreement with Gujarat State Petronet Ltd (GSPL) which is also a significant gas carrier in India such as GAIL," said the source.
 
D J Pandian, managing director of GSPL, said, "We are working on the pros and cons of the new announcement but it seems that the gas buyers would have to bear the 10 per cent levy. At present, the gas transportation cost range between 10-20 per cent of the total price a buyer pays. But with the ST burden, gas transportation would have a bigger stake in the cumulative prices of gas each unit."
 
However, Petronet LNG, which transports its gas through the GAIL pipeline, would not be affected, while there is an apprehension that in the next budget the government may even bring in regassification of LNG within the ST orbit.
 
"The central government has been trying to bring so many services under the umbrella of ST, and we expect that the next Union budget will levy ST on regassification of natural gas also," said a senior official of PLL.
 
Prosad Dasgupta, director (finance) of Petronet, reacting to the development, said, "We are not going to be affected as the gas carrier will have to take it with the buyers and subsequently, buyers would take it up with the end-users."
 
A source close to GGCL, which has its own gas transportation business apart from gas distribution in Gujarat, said, "Only 70 km stretch of our pipeline connecting Hazira with Ankleshwar has third party access and prices may be hiked for the customers buying gas in this stretch. Prices of gas may not be hiked in Surat and Ankleshwar where we use our own pipeline infrastructure and the ST would not be levied on such usage."

 
 

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First Published: Mar 03 2005 | 12:00 AM IST

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