Gujarat State Petronet: The Petroleum and Natural Gas Regulatory Board (PNGRB) issued a tax order for GSPL’s HP gas network. The changed tax will be applicable from May 1, 2024.
Introduction to Market Reaction
Gujarat State Petronet (GSPL) witnessed a significant drop in its share price, with a 20% lower circuit triggered at Rs 302.30 on the BSE.
This reaction came following the issuance of a tariff order by the Petroleum and Natural Gas Regulatory Board (PNGRB) for GSPL’s HP gas network.
Details of the Tariff Order
The PNGRB announced a revised tariff for GSPL’s HP gas network, which will take effect from May 1, 2024.
The revised tariff, set at Rs 18.1 per metric million British thermal unit (mmbtu), represents a substantial reduction from the provisional tariff of Rs 34.0/mmbtu. GSPL had initially sought an upward tariff revision to Rs 50.77/mmbtu.
Factors Leading to the Tariff Reduction
The disparity between GSPL’s tariff request and the regulator’s decision primarily stems from three key factors: capex, opex, and volume divisor.
These factors collectively contributed to the significant reduction in the approved tariff, with notable reductions in capex (Rs 13.7/mmbtu), opex (Rs 8.7/mmbtu), and volume divisor (Rs 11/mmbtu).
Regulatory Framework and Future Considerations
PNGRB clarified that the tariff determination does not constitute authorization and emphasized the need for entity approval in accordance with the existing regulatory framework.
Additionally, PNGRB reserved the right to verify or audit the information provided for tariff determination, including cost allocation methods, through internal or external agencies. Consequently, the approved tariff remains subject to revision based on forthcoming authorizations, information, and verification processes.
Review Mechanism and Potential Impact
PNGRB outlined a review mechanism for GSPL’s HP tariff in the next financial year, particularly in response to significant variations in actual volume flows compared to the projected volumes considered in the current tariff order.
This review mechanism ensures ongoing alignment between tariff rates and operational realities, safeguarding the interests of both stakeholders and consumers.
Market Outlook
Despite the downward pressure on GSPL shares resulting from the PNGRB tariff order, the broader market, represented by the S&P BSE Sensex, demonstrated resilience with a 0.5% increase at 73,423.
As GSPL navigates the implications of the revised tariff, market observers will closely monitor developments to gauge the company’s strategic response and potential implications for its financial performance and market positioning.
