GAIL (India) Ltd. will utilize from the tax hike for its gas pipeline network, however, the earnings gain may not be as much as India’s largest gas company had predicted.
The Petroleum & Natural Gas Regulatory Board approved an integrated tariff rate for two of the key pipelines managed by GAIL. While the new rate is 18 percent higher than the previous, it’s nearly 58 percent lower than what the gas producer had asked.
The hike in tariff rates was expected to provide a boost to the stock that’s been struggling due to the overhang of falling gas prices in the Asian market. The lower price of liquefied natural gas made it difficult for the gas distributor to sell the commodity at a profit in the domestic market.
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The reason behind the lower rate may be deviations seen in GAIL’s tariff submission which include lower operating cost, gas loss, higher volume divisors, number of working days and life of the asset.