Section 14 in The Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008
14. All assumptions with reference to the estimates of capital or operating costs and any other assumption which has a material impact on the determination of the unit natural gas pipeline tariff are to be separately indicated along with the financial impact of the same.
Attachment 2 to Schedule A[see clause 4 (3)(a) of the Schedule]Treatment of a fixed asset in the determination of return on total capital employed for natural gas pipeline tariff.The basis of considering fixed assets in a natural gas pipeline in the determination of the return on total capital employed shall be as per the following norms :-(1)A fixed asset in a natural gas pipeline is a tangible asset having a useful operating life of more than one year and is integral to the generation of revenues through natural gas pipeline tariff. Investment in securities, goodwill, current assets, accumulated loss not written-off, work-in-progress, etc. are not fixed assets.(2)Any change in the historical cost of the fixed asset due to revaluation or capitalization of losses shall not be considered. However, cost incurred in improvements, modification, expansion or replacement of any fixed asset shall be considered in line with the treatment prescribed in the mandatory accounting of The Institute of Chartered Accountants of India.(3)Only the cost of land purchased and used for putting the facilities essential to the natural gas pipeline shall be considered. Land purchased for any future use (such as for putting-up facilities required for expansion of capacity in natural gas pipeline or its extension) shall be considered only when used.(4)Any change in the value of the fixed asset due to capitalization of interest on loan (including foreign exchange variation in case of any loan in any foreign currency) during the pre-commissioning phase of the fixed asset shall be considered provided such loan was utlized for creation of the said fixed asset only.(5)A fixed asset shall be considered for return on capital employed on a "rolling basis" till the end of the economic life of the natural gas pipeline project, provided it is not de-commissioned. On de-commissioning of the fixed asset, the value realized on its sale or scrapping shall be considered as a project inflow in the DCF calculations. In the terminal year of the economic life, the residual value of the fixed asset, which is the difference between the original cost less the amount of accumulated depreciation shall be treated as a project inflow in the DCF calculations for natural gas pipeline tariff.(6)Treatment of line-pack volume in natural gas pipeline shall be as per the procedure indicated below :-(a)Assessment of the volume of natural gas required as line pack in the natural gas pipeline as and when commissioned shall be as specified in the relevant regulations for technical standards and specifications, including safety standards.(b)The line-pack value of natural gas in natural gas pipelines and included in the total capital employed or determination of the unit natural gas pipeline tariff shall be considered as a non-depreciating fixed assets and the value to remain fixed over the economic life of the project.(c)The value of the line-pack volume shall be derived by multiplying the volume of line-pack by the average cost of natural gas at the point of injection of natural gas into the natural gas pipeline at the time of commissioning of the natural gas pipeline.(d)The salvage value of the line-pack volume at the end of the economic life of the project shall be equal to its value assessed at the time of its capitalization specified under sub-clause (b) and shall be considered as a project inflow.
