GAIL shares tumble as PNGRB approves smaller-than-expected pipeline tariff hike
The regulator increases the integrated natural-gas pipeline tariff to ₹65.69/mmBtu - well below the demand by GAIL - sending the stock down sharply
Impact of the revised tariff on GAIL
GAIL’s stock fell over 6% to ₹172.22 on the NSE after the Petroleum and Natural Gas Regulatory Board sanctioned a far smaller increase in tariff compared with what the market was expecting. The regulator sanctioned a new tariff of ₹65.69 per mmBtu, representing only a mild increase, against GAIL’s proposal for ₹78/mmBtu.
GAIL’s management had estimated earlier this year that a tariff jump of around 35% could increase its annual pre-tax earnings by almost ₹3,400 crore. Prior to the revision, the levelised tariff was at around ₹58.61/mmBtu. The company had made a case for a steeper increase to compensate for increasing maintenance costs and help its pipeline network expansion.
However, brokerage houses were less than impressed with the less-than-expected hike. Citi analysts said the regulator’s 12% hike was below its assumption of a 15% increase and significantly lower than the 33% GAIL had sought. UBS, in turn, observed that the revision only corrects two parameters — system-use-gas and volume divisor — while updates for other parameters have been deferred to FY28.
While the hike gives GAIL partial respite, it is inadequate to yield a powerful earnings boost that the company was expecting. However, analysts feel that the revised tariff would still support GAIL’s financials until a comprehensive tariff review is done in 2028.
