Pricing of Products and Services in GAIL

by:Pricing Department

April 7, 2023

Presentation Flow Products & Services at a Glance Natural Gas Pricing Liquid Hydrocarbon Pricing Polymer Pricing Transportation Tariff: Natural Gas Transportation Tariff: LPG City Gas Distribution Pricing

2 Pricing Department

April 7, 2023

Products at a Glance Natural Gas

APM, Market Price Gas (e.g. Panna-Mukta &Tapti, Ravva, RIL) R-LNG

Liquid Hydrocarbons Propane, LPG, SBPS, Pentane, MFO, Hydrogenated C4 Mix LPG,

Propylene, Naphtha, Slop Oil Petrochemical

HDPE grades, LLDPE grades PS, GS, Machine Waste, Butene-1, Spent Alumina, Powder Waste ,

Polymer fines, LP Wax Transportation

Natural Gas: through major trunk lines like HVJ/DVPL/GREP, DUPL/DPPL, etc. and through Regional Pipeline Networks, Spur Lines & Dedicated Pipe Lines.

LPG: through cross-country major trunk lines like JLPL, and VSPL.3 Pricing Department

April 7, 2023

Natural Gas Pricing Administered Price Mechanism (APM)

Government mandates the price of Natural Gas sold to customers under APM regime. Ministry of Petroleum & Natural Gas issues Circulars from time to time for revision in Price.

APM Gas price was revised vide circular dated 20.06.2005 & dated 05.06.2006 of MoP&NG. Present APM Gas Price are as follows:

Sr. No.

Type of Gas Consumer Segment

LocationMaharashtra,

Gujarat, & HVJ/DVPLK.G. &

Cauvery BasinNorth-

East

1. APM Price

Power and Fertilizer Rs.3,200/MSCM Rs.1,920/MSCM

City Gas & Consumers having allocations up to 0.05 MMSCMD

Rs.3,840/MSCM Rs.2,304/MSCM

2. Non-APM Price

Consumers other than at Sr. No.1 $4.75/MMBTU $3.5/MMBTU Rs.3,200/

MSCM

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April 7, 2023

Natural Gas Pricing continued…

Market Priced Gas PMT Gas: Gas produced from Panna, Mukta & Tapti fields by PMT-

JV is purchased by GAIL as per rate prevalent under Production Sharing Contract.

RAVVA – 1 & Satellite: Gas produced from RAVVA fields by RAVVA Consortium is purchased by GAIL as per rate prevalent under Production Sharing Contract.

Source UnitLocation

Maharashtra, Gujarat, & HVJ/DVPL

K. G. & Cauvery Basin

North-East

Panna – Mukta USD/MMBTU 5.73 N/A N/A

Tapti USD/MMBTU 5.57 N/A N/A

Ravva - 1 USD/MMBTU N/A 3.50 N/A

Ravva-Satellite USD/MMBTU N/A 4.30 N/A

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April 7, 2023

Natural Gas Pricing continued…

RIL GAIL procures gas from Reliance Industries Limited for the various LPG

units along HVJ/DVPL and DUPL/DPPL. Current price of RIL is based on formula approved by EGoM and is currently $4.205/MMBTU. This price is effective for a period of 5 years.

R-LNG Petronet LNG Limited (PLL), Dahej, Gujarat is sourcing R-LNG to the tune

of 5 MMTPA from Ras Gas, Qatar under a long term contract in which GAIL’s share in 60%.

As per MoP&NG circular dated 06.03.2007, R-LNG procured under long term contracts shall be pooled to arrive at unified price applicable to all the consumers.

R-LNG is also sourced from PLL & Hazira LNG Private Limited (HLPL), Hazira, Gujarat on spot basis whose price depends upon international demand & supply of LNG Cargoes.

GAIL also procures LNG and gets it re-gasified from PLL terminal at Dahej. Present price of R-LNG is $4.6578/MMBTU excluding Re-gasification

Charges and other levies and duties.

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April 7, 2023

Liquid Hydrocarbon Pricing Pricing of LHC products are market driven except Domestic

LPGSr. No. Product Pricing Basis

1. LPGImport Parity Price is calculated by IOCL and provided to GAIL. FoB Prices of Saudi CP price of Propane & Butane are being taken as benchmark prices in 60:40 ratio to derive the delivered prices of LPG at each plant.

2. PropanePropane price is indexed to Bulk LPG declared price of Oil Marketing Companies (OMCs). Revision in price takes place based on demand-supply situation, prices prevalent in market & inventory situation at different plants.

3. SBPS & Pentane

Prices of SBPS & Pentane are indexed to BPCL Naphtha Ex-Mumbai Prices. Revision in price takes place based on demand-supply situation, prices prevalent in market & inventory situation at different plants.

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April 7, 2023

Liquid Hydrocarbon Pricing continued…

Sr. No. Product Pricing Basis

4. MFO at Pata & Vaghodia

MFO Vaghodia is indexed to BPCL Naphtha Ex-Mumbai Prices & MFO Pata is indexed to furnace oil of HPCL/BPCL Ex-Delhi prices.

5. Hydrogenated C4 Mix LPG C4 Mix price is indexed to Domestic LPG Pata prices.

6. Propylene Propylene price is indexed to IOCL Mathura Propylene price.

7. Slop OilPresently it is being sold at Rs.15500/MT, price is being fixed depending upon production/demand in lieu of limited market of Slop Oil.

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April 7, 2023

Liquid Hydrocarbon Pricing continued…

Sr. No. Product Pricing Basis

8. Naphtha Policy 1:OMCs least landed price minus 450 for customers in power & fertilizer sector.OMCs least landed price minus 400 for customers in other sectorsPolicy 2:Naphtha FoB Platts Arab Gulf Price minus 500 for customers not providing documentary evidence from Vijaipur plant

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April 7, 2023

Petrochemical Pricing Petrochemical Prices are fixed on Import Parity basis. The CFR prices South East Asia and Indian main port prices for the three

grades LLDPE Film, HDPE Film and HDPE Injection are considered as per ICISLOR (ICIS Pricing) of the last Friday of previous month.

The CFR prices have to be worked out for four ports i.e., Mumbai, Haldia, Kochi and Chennai by working out back calculation for FOB prices of Dammam for South East Asia and Indian main port. The average of both the FOB prices will be considered as FOB price Ex-Dammam and CFR price for all the four Indian ports worked out by adding the applicable freights.

The following amounts are added for CFR prices worked out for all four ports:(a) Towards Quantity Discount – Rs. 900/-(b) Towards Handling charges – Rs. 1,200/-(c) Towards Cash Discount – Rs. 600/-

Total – Rs.2,700/-10 Pricing Department

April 7, 2023

Petrochemical Pricing continued… Ex-works - Pata prices to various pricing zones are to be fixed

considering freight differential from the nearest port to the location. Prices of 3 main grades are calculated as per the above methodology

and prices of rest of the grades are derived by adding difference between the cost of production between the main grades and other grades.

After fixing the IPP price, Prices are reviewed by Marketing Department and they forward the adjustments to be made to IPP prices based on price of competitor in the market in order to calculate the proposed prices for management approval.

Prices are being worked out for 63 pricing Zones/213 locations. Stock Point Prices are calculated based on proposed prices for

Consignment Stockist (CS) points.

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April 7, 2023

Petrochemical Pricing continued… Derivation of Proposed Price from Co-producer Price:

Co-producer ex-work price is taken from which Cash discount, Location Discount, Regional Discount are subtracted and applicable duties and taxes are levied & finally freight is added to obtain Co-producer delivered price.

From the Delivered Price so obtained Freight from location to Pata is subtracted, applicable duty is subtracted, cash discount is added and any premium or discount over & above co-producer price is added to have Proposed GAIL’s Ex-work Price.

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April 7, 2023

Petrochemical Pricing continued… Discounts

Pre-Excise Discounts Cash Discount Location Discount

Post Excise Discounts Monthly Quantity Discount (All grades) Special Monthly Quantity Discount (RM - R35A, R35U, IM - I50A, I60A,

I60U, BM – B52A, B63A, B55HM, Pipe, Sheathing – E52A, E52U) Additional Monthly Quantity Discount (For Raffia) Quarterly Quantity Discount (For Raffia) Trade Discount (E52U, P54) Special Trade Discount (For Raffia)

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April 7, 2023

Petrochemical Pricing continued… Pricing of By-Products

Sr. No. Product Indexation/Price (Rs./MT)

1. PS I50A180A Kanpur price – 10000

2. GS I50A180A Kanpur price – 13000

3. MACHINE WASTE 75% OF I50A180A Kanpur price

4. G-PE-SHRED MACHINE WASTE + 4000

5. POWDER WASTE 72% OF I50A180A Kanpur price

6. POLYMER FINES 70% OF I50A180A Kanpur price

7. BUTENE-1 LLDPE Grade Price

8. SPENT ALUMINA Presently priced at Rs.7750/MT, limited market

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April 7, 2023

Transportation Tariff: Natural Gas Natural Gas Pipeline Networks in GAIL

HVJ/GREP/DVPL DUPL/DPPL Gujarat Networks K. G. Basin Networks NCR Network Cauvery Basin Network Mumbai Network Agartala Network Rajasthan Network Assam Network

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April 7, 2023

Transportation Tariff: Natural Gas continued… Tariff Commission had recommended the tariff for following Major

Pipelines calculated on Cost of Service Methodology which was approved by MoP&NG, the same was applicable till March 31, 2009: HVJ/DVPL/GREP K.G. Basin: Kakinada-Tatipaka-Kouvur & Tatipaka-Kondapalli Agra-Ferozabad: Spur Line Charge & City Distribution Charge

MoP&NG has notified Petroleum and Natural Gas Regulatory Board Act, 2006.

Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted on October 1, 2007.

PNGRB has notified regulation for calculation of Transportation Tariff of pipelines other than Dedicated Pipelines on November 20, 2008.

GAIL is in process for submitting the transportation tariff for various pipeline networks calculated as per the regulation.

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April 7, 2023

Transportation Tariff: Natural Gas continued… PNGRB Tariff Regulation: Salient Points

Applicable for Natural Gas pipelines including Spur Line and excludes Dedicated Pipeline and CGD networks.

Capacity of Natural Gas Pipeline means the sum of capacity requirements of the entity (I/C + GSA), firmed-up contracted capacity with other entities (GTA) and at least 33% of sum of own requirement and firmed-up capacity.

Tariff Review shall be done by the Board after every five consecutive years. Tariff shall be uniform within a Zone. Each Zone shall be of 300 kms each. Last zone

may be less than 300 kms. The First zone shall start from the point of origin of pipeline. Each tariff zone shall have a corridor of 50 kms or 10% of the length of the pipeline

(excluding spur line), which ever is lower, on either side of the pipeline. In case where injection of natural gas takes place in pipeline, the same shall be Zone

‘One’ and subsequent zone shall be counted sequentially on either side along the contractual path.

Tariff for next Zone shall be an increment over the previous Zone. Entity is free to define its own number.

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April 7, 2023

Transportation Tariff: Natural Gas continued… PNGRB Tariff Regulation: Salient Points (continued…)

Tariff shall be worked out on DCF methodology based on the balance economic life of the pipeline.

Economic Life of the pipeline shall be a period of 25 Years beginning from the date of commencement of physical activity for laying the pipeline.

Extension of Economic Life for a block of 10 years at a time. 12% post tax Rate of Return on capital employed for the balance economic life

of the pipeline has been provided. Capital employed shall be equal to Fixed Assets less Accumulated Depreciation

plus Working Capital (30 days Operating Cost & 18 days Receivables). Fixed Assets shall include any subsequent replacement or improvement or

modification. Volume to be considered for the First Year to Fifth Year of the operation of the

pipeline shall be equal to 60%, 70%, 80%, 90% & 100% of entity’s own requirement and the firmed-up contracted capacity respectively.

Volume from the sixth year onwards shall be equal to sum of 100% of entity’s own requirement and firmed-up contracted capacity and the actual volume of gas transported on common carrier of the previous year.

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April 7, 2023

Transportation Tariff: Natural Gas continued… Transportation Tariff for Dedicated Pipelines:

Methodology for estimating tariffs for dedicated lines or a pipeline network is Discounted Cash Flow Method - IRR on the equity @ 12% post tax.

Guidelines for appraisal of projects are followed as per the circular of Corporate Finance & Accounts dated April 24, 2009.

Financial Assumptions are classified into two broad categories: Capital Structure Operating Assumptions

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April 7, 2023

Transportation Tariff: Natural Gas continued…

Capital Structure:Sr. No. Assumption Value

1 Debt-Equity 70:30 or 60:40

2 Interest on long term loan SBI PLR – 2%.

3 Moratorium on long term loans 2 years

4 Repayment 8 years after moratorium

5 Interest on Working Capital 10%

6 Return on Equity 12% (post tax)

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April 7, 2023

Transportation Tariff: Natural Gas continued… Operating Assumptions:Sr. No. Assumption Value

1 Economic Life 15 yrs or less for Pipeline, 15 yrs for Compressor station

2 Inflation 5%3 Terminal Value 5%4 Manpower Cost Rs.20 Lacs per person per anuum5 Overhead costs 100% of manpower cost6 Insurance 0.50% of capital cost7 Repair & Maintenance 1.50% of capital cost for Pipeline, 3.50% of

capital cost for Compressor Station8 Corporate Tax Rate As per IT act9. Unaccounted Gas 0.6%

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April 7, 2023

Transportation Tariff: LPG Transportation Tariff for Jamnagar – Loni Pipeline and

Vishakapatnam – Secunderabad Pipeline is worked out in-house.

Current Prices for LPG transportation is as below: JLPL: Rs.1.52/MT/Km. VSPL: Rs.1.57/MT/Km.

PNGRB is in process of notifying regulation for calculation of Transportation Tariff for Petroleum Product Pipeline.

Once notified, GAIL shall be required to calculate the tariff as per the regulation and apply the same on non-discriminatory basis.

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April 7, 2023

City Distribution Pricing GAIL, in past, had formed various JVs for implementing City Gas

Projects in various cities. GAIL has also formed a subsidiary – GAIL Gas Limited to undertake

future City Gas Projects under PNGRB regime. GAIL Gas has successfully bid for City Gas Project in the cities of

Sonipat, Dewas, Meerut and Kota. Pricing department has provided support to GAIL Gas for bidding for

City Gas Projects. Pricing Policy of GAIL Gas is finalized in consultation of Pricing

department. Pricing department provides support to GAIL Gas for finalizing

product prices and network tariff for existing cities viz. Firozabad and Baroda.

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April 7, 2023

Thank you

24 Pricing Department

HVJ/GREP/DVPL

04/07/202326 GAIL (India) Limited - Co. Pricing

DUPL/DPPL

04/07/202327 GAIL (India) Limited - Co. Pricing

South Gujarat Network

K. G. Basin Network

NCR Network

04/07/202330 GAIL (India) Limited - Co. Pricing

Cauvery Basin Network

04/07/202331 GAIL (India) Limited - Co. Pricing

Mumbai Network

Agartala Network