Gujarat State Petronet - Navigating The Ifs And Buts Of The Tariff Revision That May Occur: Motilal Oswal


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Except for FY20, when the tax write back on account of the adoption of the new tax rate resulted in a return on capital employed of 17.5%, the average RoCE for Gujarat State Petronet Ltd. stood at 12% since FY18, which is the regulated post-tax return as per the Petroleum and Natural Gas Regulatory Board.

Excluding long-term investments of Rs 52 billion, RoCE over FY18-22 (except FY20) stood at 29.1%, much above the regulated RoCE.

The above, combined with expected investments of Rs 45 billion in two phases, calls for a detailed study of different scenarios to evaluate what the tariff for the high pressure gas grid may be revised to to going forward.

A capex of Rs 20 billion in phase I and no extension to the economic life beyond FY32 may result in a tariff of Rs 49/metric million British thermal unit from Rs 34/mmBtu at present.

If we take into account the full capex of Rs 45 billion, along with the extension of economic life to FY42, the tariff may be revised to Rs 48/mmBtu instead.

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