PETROLEUM AND NATURAL GAS REGULATORY BOARD

Notification

New Delhi, the 20th November, 2008

G.S.R. 807(E) - In exercise of the powers conferred by Section 61 of the Petroleum and Natural
Gas Regulatory Board Act, 2006 (19 of 2006), the Petroleum and Natural Gas Regulatory Board
hereby makes the following regulations, namely:-

1. Short title and commencement

(1) These regulations may be called the Petroleum and Natural Gas Regulatory
Board (Determination of Natural Gas Pipeline Tariff) Regulations, 2008.
(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definition

(1) In these regulations, unless the context otherwise requires:-

(a) "Act" means the Petroleum and Natural Gas Regulatory Board Act, 2006;

(b) "appointed day" means the date of October 1, 2007;

(c) "Board" means the Petroleum and Natural Gas Regulatory Board established
under sub-section (1) of section 3 of the Act;

(d) "capacity of natural gas pipeline" means the capacity of natural gas pipeline
as specified under the Petroleum and Natural Gas Regulatory Board (Authorizing
Entities for Laying, Building, Operating or Expanding Natural Gas Pipelines)
Regulations, 2008;

Provided that the capacity of natural gas pipeline is respect of entity authorized by
the Central Government for laying, building, operating or expanding natural gas
pipelines before the appointed day shall be as approved by the Board as per the
basis specified in the relevant regulations for determining the capacity of natural
gas pipeline;

(e) "initial unit natural gas pipeline tariff" means the unit natural gas pipeline
tariff determined for a period commencing from-

(i) The date of commissioning of the natural gas pipeline in any financial
year and ending on the last day of that financial year in case the natural
 gas pipeline is commissioned on or after the notification of these
regulations; or

(ii) The date of coming of the natural gas pipeline within the purview of
these regulations in any financial year and ending on the last day of that
financial year in case the natural gas pipeline is commissioned before the
notification of these regulations;

Provided that in case the period between the date of commissioning of the
natural gas pipeline or the date of coming of the natural gas pipeline within the
purview of these regulations in any financial year, as the case may be, and the
last day of the financial year is less than one hundred and eighty three days, the
initial unit natural gas pipeline tariff shall be a for period commencing from the
date of commissioning of the natural gas pipeline or the date of coming of the
natural gas pipeline within the purview of these regulations in the financial year
and extend up to the last day of the immediately succeeding financial year:

Provided further that the initial unit natural gas pipelines tariff shall be fixed on
a provisional basis first and then finalized as per the basis and in the time frame
specified under clause 9 of Schedule A.

(f) "natural gas pipeline" means any pipeline including spur lines for transport of
natural gas and includes all connected equipments and facilities, such as,
compressors, storage facilities, metering units but excludes-

(i) Dedicated pipeline laid to transport natural gas to a specific

customer to meet his requirement and not for resale;

(ii) Pipelines in a city or local natural gas distribution network which

are regulated by the Petroleum and Natural Gas Regulatory Board
(Authorizing Entities to Lay, Build, Operate or Expand City or Local
Natural Gas Distribution Networks) Regulations, 2008;

(g) "natural gas pipeline tariff" means the unit rate of tariff for a natural gas
pipeline (excluding statutory taxes and levies) in rupees per million British
Thermal Units (Rs. /MMBTU) for transport of natural gas;

(h) "tariff review" means the review of the unit natural gas pipeline tariff after
every five consecutive years by the Board with the first tariff review to be done
after the end of five consecutive years after the end of the initial unit natural gas
pipeline tariff period as specified under sub-section (e):

Provided that the unit natural gas pipeline tariff so determined at the time of any tariff review
shall apply for the period up to the next tariff review;
 (i) "tariff zone" means the zone -

(i) of a length of three hundred kilometers each along the route

of the natural gas pipeline from the point of origin till the end
point:

Provided that the last zone of the natural gas pipeline may be of a length of three
hundred kilometers or less:

Provided further that any natural gas pipeline of a length less than three hundred
kilometers shall be counted as a zone; and

(ii) a corridor along the natural gas pipeline with a width of up to

ten percent of the natural gas pipeline without including the length
of the spur lines of fifty kilometers measured from the nearest
point on the surface of the natural gas pipeline on both sides, and
including the point of origin and the end point of the natural gas
pipelines, whichever is less, and -

(a) the first tariff zone shall be counted with reference to any
zone in which the point of injection of natural gas into the
natural gas pipeline falls; and

(b) the subsequent tariff zone or tariff zones, as the case may
be, shall be counted separately on either side along the
contractual path for delivery of natural gas in the natural gas
pipeline;

Provided further that natural gas pipeline tariff for transport of natural gas from the same source
shall be uniform for all the customers located within the zone:
Provided further that the entity shall supply natural gas to any customer located in the zone
subject to the techno-commercial feasibility of laying, building, operating or expanding a new
spur lines from the natural gas pipeline.
Explanation:-
For the purposes of this clause, the point of origin and the end point in the natural gas pipeline as
also the sequential numbering of the tariff zones, as the case may be, shall be as indicated in the
letter of authorization or fixation of the natural gas pipeline tariff by the Board.
(2) Words and expression used and not defined in these regulations, but defined in
the Act or in the rules or regulations made thereunder, shall have the meanings
respectively assigned to them in the Act or in the rules or regulations, as the case may
be.
3. Application
These regulations shall apply to an entity-

(1) Authorized by the Central Government under regulation 17 of the Petroleum and
Natural Gas Regulatory Board (Authorizing Entities to Lay, Build Operate or Expand
Natural Gas Pipelines) Regulations, 200/8 for laying, building, operating or
expanding a natural gas pipeline before the appointed day;

(2) Laying, building, operating or expanding a natural gas pipeline before the
appointed day and authorized by the Board for such activities under regulation 18 of
the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build,
Operate or Expand Natural Gas Pipelines) Regulations, 2008.

(3) Laying, Building operating or expanding a dedicated pipeline which is converted

into a natural gas pipeline under the provisions of sub-regulation (1) or (2) of
regulation 19 of Petroleum and Natural Gas Regulatory Board (Authorizing Entities
to Lay, Build, Operate or Expand Natural Gas Pipelines), Regulations, 2008.

4. 1Determination of natural gas pipeline tariff.

(1) The natural gas pipeline tariff in respect of an entity covered under sub-
regulation (1), sub-regulation (2) or sub-regulation (3) of regulation 3 shall be
determined as per the procedure at Schedule A.

(2) Prior to determination of the natural gas pipeline tariff, the Board shall
issue a public notice on its website containing a public consultation document
providing an opportunity to stakeholders (including the entity concerned) to
participate in the determination of the natural gas pipeline tariff.

(3) Stakeholders (including the entity concerned) may submit their comments in
writing within fifteen days from the date of webhosting of the public notice.
(4) On the expiry of the period provided for stakeholder comments as referred to
in sub-regulation (3), the Board shall forward the comments received to the
entity concerned for it to submit its response within fifteen days of the receipt
thereof. The Board may, if required, also invite all stakeholders who have
offered their comments including the entity concerned for discussions. The
Board shall after considering the tariff filings by the entity, the comments of
other stakeholders, the response of the entity concerned and discussions, if any,
issue the tariff order.

1
Substituted vide PNGRB (Determination of Natural Gas Pipeline Tariff) Second Amendment
Regulations, 2014.
[REGULATION PRIOR TO AMENDMENT] Effective From 20/11/08 TO 26/02/14
4 The natural gas pipeline tariff in respect of an entity covered under clause (1), clause (2) or clause (3) of
regulation 3 shall be determined as per the procedure at Schedule A.
 5. Form for data submission by entity for determination of natural gas pipeline tariff.

Every entity shall submit to the Board the financial costs and other data in the form at
Attachment 1 of Schedule A, if as on the day of the notification of these regulations, the
natural gas pipeline -

(1) Is not in operation, then at least six months before the likely date of
commissioning of the natural gas pipeline, or within ninety days of the date of
notification of these regulations, whichever is later; or

(2) Is already in operation, then, in relation to an entity referred to in -

(a) Clause (1) of regulation 3, within ninety days of the notification of these
regulations;
(b) Clause (2) of regulation 3 within ninety days of the grant of authorization by
the Board; or
(c) Clause (3), within ninety days of the date of authorization by the Board:

Provided that the entity shall charge initial unit natural gas pipeline tariff "on account
basis" based on these regulations from the date of commission of natural gas pipeline
referred to in clause (1) of regulation 3 or the date of authorization by the Board of
natural gas pipeline referred to in clause (2) or clause (3) of regulation 3, as the case may
be, till the date the Board provisionally fixes the initial unit natural gas pipeline tariff:
2
Provided further that the initial unit natural gas pipeline tariff shall be
provisionally fixed by the Board within six months of receipt of the relevant tariff
data from the entity after which the entity shall carry out adjustments with a
retrospective effect with the customers for the difference between the initial unit
natural gas pipeline tariff that the entity had so chatged and that provisionally
fixed.

2
Substituted vide PNGRB (Determination of Natural Gas Pipeline Tariff) Second Amendment Regulations, 2012.
[REGULATION PRIOR TO AMENDMENT] Effective From 20/11/08 TO 12/09/12
5 Provided further that the entity shall carry out adjustments, with a retrospective effect with the customers for the
difference between the initial unit natural gas pipeline tariff that the entity had so charged and that provisionally
fixed by the Board.
 6. Miscellaneous
3
If any question arises as to the interpretation of these regulations, the same shall be
decided by the Board.

Schedule A
[see regulations 4 and 5]
Procedure for determination of natural gas pipeline tariff

The natural gas pipeline tariff shall be determined by considering a reasonable rate of
return on normative level of capital employed plus a normative level of operating
expenses in the natural gas pipeline.

Explanation:

The expression "normative level" shall be with reference to a level, which is both
reasonable and justifiable in terms of incurrence of capital and operating expenditure
required for laying, building, operating or expanding an efficiently natural gas pipeline
over its economic life.

1. Financial Feasibility

The entity to which these regulations apply shall submit all technical, operating,
financial and cost data of the natural gas pipeline project that may be required by the
board in determination of the natural gas pipeline tariff.

2. Methodology for determination of natural gas pipeline tariff

The unit rate of natural gas pipeline tariff to be charged for a period shall be the
calculated based on the "Discounted Cash flow" (DCF) methodology considering the
reasonable rate of return as specified in clause 3 to be the project's internal rate of
return. The parameters relevant to the applicability of the DCF methodology
considering the reasonable rate of return as specified in clause 3 to be the project's
internal rate of return. The parameters relevant to the applicability of the DCF
methodology have been described in detail in clauses 4 to 6 below.

3
Substituted vide PNGRB (Determination of Natural Gas Pipeline Tariff) Amendment Regulations, 2014.
[REGULATION PRIOR TO AMENDMENT] Effective From 20/11/08 TO 29/05/12
6. If any dispute arises with regards to the interpretation of any of the provisions of these regulations, the decision of
the Board shall be final.
[REGULATION PRIOR TO AMENDMENT] Effective From 30/05/12 TO 31/12/14
6. (1) The Board may make guidelines from time to time relating to determination of natural gas pipeline tariff. (2)
If any dispute arises with regards to the interpretation of any of the provisions of these regulations, the decision of
the Board shall be final
3. Reservation rate of return

The rate of return on capital employed shall be the rate of return on capital employed
equal to twelve percent post-tax. The rate of return on capital employed once applied
to a natural gas pipeline project shall remain fixed for the entire economic life of the
project.
___________________________

1 Discounted Cash Flow methodology refers to equating the inflows from the
projected revenue earnings out of natural gas pipeline tariff with the outflows of
capital and operating expenditures over the economic life of the project by
discounting these flows at the project's reasonable rate of return. The volumes and
outflows are estimated over the economic life which results in the determination of
the natural gas pipeline tariff required to be earned by the project to achieve the
internal rate of return.

Note:

The pre-tax rate of return on capital employed shall be computed by grossing-up twelve
percent by the nominal rate of income tax applicable for corporate assesses as per the
provisions of the income Tax Act, 1961, as amended from time to time.

4. Return on total capital employed

(1) The reasonable rate of return shall be applied on the total capital employed to
determine the return on capital employed in the project over its economic life and
the authorized entity is free to leverage the financing of the project in any suitable
manner.

(2) The total employed shall be equal to the gross fixed assets in the project less
accumulated depreciation2 plus normative working capital (equal to thirty days of
operating costs excluding depreciation and eighteen days natural gas pipeline
tariff receivables).

(3) The gross fixed assets shall be equal to their actual historical cost of
acquisition (including the cost of an subsequent replacement or improvement or
modification) or that normatively assessed by the Board, whichever is lesser and
required in the natural gas pipeline project over its economic life based on the
principles3 to create and sustain an efficient infrastructure, namely:-

(a) Treatment of an investment in the fixed asset in determination of total

capital employed shall be as per the basis indicated in Attachment 2;

(b) Capital costs in similar projects, if any, elsewhere in India benchmarked

on a "like-to-like" basis;
 (c) Appropriateness of the pipeline design and the operating philosophy with
regards to maximum allowable operating pressure;

(d) Optimization of the equipments and facilities such as, compressors,

metering systems, SCADA, fire fighting required, based on an assessment of
the appropriate available technology;

(e) Spur lines;

(f) Design parameters for compressors; and

(g) Assessment of the costs of major equipments and facilities in the natural
gas pipeline, laying or building costs, project management consultancy and
pre-operative expenditure.

5. Operating costs

Operating costs required in the operation and maintenance of the natural gas pipeline
over its economic life shall be computed, on an actual basis or based on a normative
assessment by the Board, whichever is lower, over the following functional cost heads,
namely:-

(1) Consumables;

(2) Utilities;

(a) power;

(b) fuel (including the cost of natural gas and the natural gas pipeline tariff not
recovered on the volume of system-use natural gas consumed in the natural gas
pipeline);

(c) water;

(3) salaries and wages;

(4) repairs and maintenance;

(5) insurance premia on assets (excluding the value of loss of profit) and on line-pack
volumes;

(6) administrative overheads [to the extend not classifiable under sub-clause (1) to sub-
clause (5)], related and also commensurate to the level of operations in the natural gas
pipelines;
 (7) depreciation on fixed assets on straight line basis based on rates as per Schedule VI to
the Companies Act, 1956); and

(8) 4miscellaneous income realizable from a fixed asset included in the return on
total capital employed or out of an expense considered as an operating cost, but not
including income from imbalance management services under relevant regulations
of the Board, interest income, profit or loss on sale or transfer of any fixed or other
asset, shall be netted from the operating cost.

6. Volumes to be considered in determination of the unit natural gas pipeline tariff

(1) The volumes of natural gas to be considered as divisor in the determination of the
unit natural gas pipeline tariff over the economic life of the project shall be computed on
a normative basis as indicated below:-

(a) The divisor for each of the first five years of operations of the natural gas pipeline
shall be arrived by multiplying the applicable percentage utilization for the year, as
per the basis indicated below, with the sum of the capacity requirement of the entity
and the firmed-up contracted capacity with other entities as specified under the
Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build,
Operate or Expand Natural Gas Pipeline) Regulations, 2008:-

Year of natural gas pipeline operations Percentage utilization

First 60%
Second 70%
Third 80%
Fourth 90%
Fifth 100%

(b) The divisor for the sixth and the subsequent years of operation of the natural gas
pipeline shall be equal to:

(i) One hundred percent of the sum of the capacity requirements of the entity
and the firmed-up contracted capacity with other entities as specified under the
Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build,
Operate or Expand Natural Gas Pipeline) Regulations, 2008; and

4
Substituted vide PNGRB (Determination of Natural Gas Pipeline Tariff) Amendment Regulations, 2014.
[REGULATION PRIOR TO AMENDMENT] Effective From 20/11/08 TO 16/02/14
5(8) miscellaneous income realizable from a fixed asset included in the return on total capital employed
or out of an expense considered as an operating cost, but does not include interest income, profit or loss
on sale or transfer of any fixed or other asset, if any, shall be netted from the operating cost.
 (ii) The actual volume of natural gas transported on common carrier basis
against the extra capacity as specified under the Petroleum and Natural Gas
Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand Natural
Gas Pipeline) Regulations, 2008 during the immediately preceding year of
operation of the natural gas pipeline.

Explanation:-

The adjustment for the difference between the actual volume transported on
common carrier basis in any year and that included in the divisor under sub-item
(ii) to item (b) of sub-clause (1) shall be carried out on a prospective basis in the
DCF calculations for unit natural gas pipeline tariff.

(2) The volume of natural gas determined under sub-clause (1) shall be converted into its
energy equivalence in MMBTU terms for the purpose of-

(a) Determination of the provisional unit natural gas pipeline tariff by considering
the weighted average of heat value of different natural gases which are likely to
be transported by the entity during this period;

(b) Determination of the final initial unit natural gas pipeline tariff by considering
the weighted average heat value of the natural gas delivered to customers during
the initial unit natural gas pipeline tariff period;

(c) First tariff review by considering the weighted average heat value of natural
gas delivered to customers between the period from the end of the initial unit
natural gas pipeline tariff period and the due date of the first tariff review;

(d) Any subsequent tariff review by considering the weighted average heat value
of the natural gas delivered to the customers during the period between that tariff
review and the immediate previous tariff review.

7. Economic Life

The economic life of the natural gas pipeline shall be as specified in the Petroleum and
Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand
Natural Gas Pipeline) Regulations, 2008.

8. Procedure for apportioning of unit natural gas pipeline tariff over the tariff
zones

(1) The entity shall submit for the Board's approval, the calculations in respect of
apportioning of the unit natural gas pipeline tariff over all the tariff zones during the
economic life of the project in the form specified under regulation 5, by following g the
methodology as specified under sub-regulations (a), (b) and (c) regulation 7 of the
Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Laying, Building,
Operating or Expanding Natural Gas Pipeline) Regulations, 2008 except that:-

(a) There shall be no requirement of bidding while following such methodology;

(b) No weightage shall apply to such apportionment of the unit natural gas
pipeline tariff over different tariff zones; and

(c) The entity shall use its own numbers in determining such appointment.

(2) No adjustment shall be made by the entity with the customers for any over-
achievement or under-achievement in the recovery of the natural gas pipeline tariff by the
entity due to the volumes considered by the entity for apportioning the unit natural gas
pipeline tariff for each of the tariff for each of the tariff zones during-

(a) The period of initial unit natural gas pipeline tariff;

(b) The first five and consecutive years after the end of the initial unit natural
gas pipeline tariff; and

(c) The period between any two consecutive tariff reviews.

9. Determination of initial unit natural gas pipeline tariff and review of unit
natural gas pipeline tariff

(1) The unit natural gas pipeline tariff shall be determined for the natural gas pipeline
over its economic life and levelized during-

(a) The period applicable for the initial unit natural gas pipeline tariff;

(b) The period of five consecutive years after the end of the initial unit natural
gas pipeline tariff; and

(c) The period between any two consecutive tariff reviews.

(2) The initial unit natural gas pipeline tariff including its apportioning over all tariff
zones shall be determined based on provisional computations.

(3) The final computati9nos in respect of the initial unit natural gas pipeline tariff shall
be made considering the adjustments required for -

(a) The actual capital and operating costs or that normatively assessed by the
Board, whichever is lower as specified under clause 4 and clause 5;

(b) Volume consideration as per item (a) of sub-clause (1) of clause 6; and
 (c) Volume conversion into its energy equivalence as per item (b) of sub-clause
(2) of clause 6.

(4) The entity shall adjust with the customers, the difference between the natural gas
pipeline tariff recovered based on the provisional computation under sub-clause (2) and
that recoverable as per the final computation under sub-clause (3);

(5) The final unit natural gas pipeline tariff as specified under sub-clause (3) shall apply
for the period upto the first tariff review until the time the same is revised by the Board;

(6) The entity shall submit for Board's approval the data for determination of the unit
natural gas pipeline tariff after the notification of these regulations in the form and time
frame specified under regulation 5 alongwith the provisional computations of the initial
unit natural gas pipeline tariff including the apportioning of the same over all tariff
zones;

Provided that the final computations of the initial unit natural gas pipeline tariff including
apportioning of the same over all tariff zones shall be submitted three months before the
last date of the period applicable for the initial unit natural gas pipeline tariff.

(7) The entity shall submit computation of the unit natural gas pipeline tariff including
apportioning of the same over all tariff zones in the form specified under regulation 5 at
the time of each tariff review within three months of the -

(a) End of the last year of the five consecutive years after the initial unit natural
gas pipeline tariff; or

(b) End of the preceding tariff review period:

Provided that the computation shall consider the actual cost, financial and
operational data or that normatively assessed by the Board, whichever is lesser as
per clauses 4 and 5 in respect of the period specified under sub-clause (a) or (b),
as the case may be.

(8) Adjustments on account of the following variations during the five consecutive years
after the initial unit natural gas pipeline tariff or any tariff review shall be made in the
DCF calculations on a prospective basis by considering the remaining period of the
economic life of the project, namely:-

(a) The variations on account of the actual performance with respect to the capital
and operating costs which when compared with the normative parameters
identified under clauses 4 and 5;

(b) The variations in respect of the volumes under Explanation to sub-item (ii) of
sub-clause (1) of clause 6 and;
 (c) The variations

(9) The Board may, after on its own or on the entity's request, carry out a review of the
unit natural gas pipeline tariff any time between two tariff reviews, as the case may be,
considering-

(i) Applicable nominal rate of income tax used for grossing-up the rate of return
on capital employed;

(ii) Sudden change in any parameter used in the determination of the unit natural
gas pipeline tariff.

(10) The provisional and final initial unit natural gas pipeline tariff, unit natural gas
pipeline for the period of five consecutive financial years after the initial unit natural gas
pipeline tariff fixed after any tariff review thereafter shall continue to apply till the time
the same is revised by the Board.

10. 5 Adjustment of volume variation Tariff computation after final computations of initial
unit natural gas pipeline tariff.

(1) Adjustment shall be carried out in the final unit natural gas pipeline tariff
determined under sub-clause (5) of clause 9 on a year-to-year basis by the entity
with the customers considering actual volumes in any of the first five years of
natural gas pipeline operation when-

(a) The actual volumes are higher than the normative volume considered as
divisors for determination of the final unit natural gas pipeline tariff on the
basis specified in item (a) of sub-clause (1) of clause 6;or

(b) The actual volumes are higher than the normative volume considered as
divisors for determination of the final unit natural gas pipeline tariff on the
basis specified in item (a) of sub-clause(1) of clause 6 but are lower than that
considered for determination of the final unit natural gas pipeline tariff.

(2) When the actual volumes are lower than the normative volumes in any of the
first five years of natural gas pipeline operations, a set-off of the impact of such
lower volumes shall be permitted. Such set-off shall be allowed only to the extent of
impact of higher actual volumes passed on in any of the first five years and the
balance set-off, if any, shall be carried over to subsequent years, but not beyond the
first five years of natural gas pipeline operation, to be allowed for adjustment only
in case there are higher actual volumes.

5
Inserted vide PNGRB (Determination of Natural Gas Pipeline Tariff) Amendment Regulations, 2010.
Effective From 20/12/10
 (3) An audited statement showing actual volume shall be submitted by the entity to
the Board after the conclusion of each year of the first five years of natural gas
pipeline operations to enable the Board to advise the necessary adjustments.

(4) A pro-rata adjustment in apportionment of the unit natural gas pipeline tariff
over all the tariff zones determined by the Board under clause 8 of Schedule A to the
Petroleum and Natural Gas Regulatory Board (Determination of Natural Gas
Pipeline Tariff) Regulations, 2008 shall also be made with customers to the extent of
adjustment in the final unit natural gas pipeline tariff determined by the Board
under this clause.

(5) The tariff so adjusted shall also be applicable for the subsequent period till the
same is modified, adjusted or reviewed.

Attachment 1
[see regulation 5]

Project capital cost summary (Capex outflows)

Sr. Description INR FE

No.
Indian Foreign Total
Rupees Exchange (*)
A Plant and machinery
1 Receiving terminal [see attachment 1 (a)]

2 Compressor station [see attachment 1 (b)]]

3 Intermediate terminal [see attachment 1 (c)]

4 Delivery terminal [see attachment 1 (d)]]

5 Pipeline [see attachment 1 (e)]

Subtotal (A)

B Engineering costs
1 Detailed engineering, procurement, construction,
supervision and project management
2 Service Ta on above
Subtotal (B)
C Site related costs
1 Land

2 Any other (details to be given)

Subtotal (C)

D Owner's cost, start-up expenses

1 Start-up and commissioning expenses

2 Owner's management expenses
Subtotal (D)
E Other Costs

1 Contingencies and escalation

2 Preliminary and pre-operative expenses
3 Interest during construction period and financing
charges
4 Margin money for working capital
Subtotal (D)
Total (A+B+C+D+E)
(*) INR + FE converted to INR.

Note : Detailed assumption / calculations to be given

for item E.

Attachment 1 (a)
[see regulation 5]
Capital cost of receiving terminal

Total
Sr. No. Description INR FE Technical
(*)
Indian Foreign
Rupees Exchange
A Major Items
1 Scrapper traps and pig Rated capacity
signaler as per supplier
2 Metering system
3 Cartridge filters
4 Fire protection system
5 Power supply arrangement
6 Compressors Rated capacity
as per supplier
7 Any other item (details to be
 given)
Subtotal

B Bulk Materials
1 Piping
2 Electrical
3 Instrumentation
4 Any other item (details to be
given)
Subtotal

C Spares (details to be given)

D Erection
1 Mechanical
2 Electrical
3 Instrumentation
4 Civil works
5 Land
6 Any other item (details to be
given)
Subtotal

E Taxes and duties

1 Ocean freight
2 Customs duty
3 Port handling
4 Inland freight
5 Excise & CST
6 Works contract tax
7 Insurance
8 Any other applicable fax and
duty (give details)
Subtotal
Total ( to E)

(*) INR + FE converted to INR.

 Attachment 1 (b)
[see regulation 5]

Capital cost of compressors

Sr. No. Description INR FE Total (*) Technical

Indian Foreign
Rupees Exchange
A Major Items
1 Compressors Rated
Capacity as
per Supplier
2 Scrapper traps and pig
signaler
3 Metering system
4 Cartridge filters
5 Fire protection system
6 Power supply arrangement
7 Any other item (details to
be given)
Subtotal

B Bulk materials
1 Piping
2 Electrical
3 Instrumentation
4 Any other item (details to
be given)
Subtotal

C Spares (details to be
given)

D Erection
1 Mechanical
2 Electrical
3 Instrumentation
4 Civil Works
5 Land
6 Any other item (details to
be given)
Subtotal
 E Taxes and duties
1 Ocean freight
2 Customs duty
3 Port handling
4 Inland freight
5 Excise & CST
6 Works contract tax
7 Insurance
8 Any other applicable fax
and duty (give details)
Subtotal

Total (A to E)

(*) INR + FE converted to INR

 Attachment 1 (c)
[see regulation 5]

Capital cost of intermediate terminal

Sr. No. Description INR FE Total (*) Technical

Indian Foreign
Rupees Exchange
A Major Items
1 Compressors Rated
Capacity as
per Supplier
2 Scrapper traps and pig
signaler
3 Metering system
4 Cartridge filters
5 Fire protection system
6 Power supply arrangement
7 Any other item (details to
be given)
Subtotal

B Bulk materials
1 Piping
2 Electrical
3 Instrumentation
4 Any other item (details to
be given)
Subtotal

C Spares (details to be
given)

D Erection
1 Mechanical
2 Electrical
3 Instrumentation
4 Civil Works
5 Land
6 Any other item (details to
be given)
Subtotal
 E Taxes and duties
1 Ocean freight
2 Customs duty
3 Port handling
4 Inland freight
5 Excise & CST
6 Works contract tax
7 Insurance
8 Any other applicable fax
and duty (give details)
Subtotal

Total (A to E)
(*) INR + FE converted to INR
 Attachment 1 (d)
[see regulation 5]

Capital cost of delivery terminal

Total
Sr. No. Description INR FE Technical
(*)
Indian Foreign
Rupees Exchange
A Major Items
1 Scrapper traps and pig signaler Rated
Capacity as
per supplier
2 Metering system
3 Cartridge filters
4 Fire protection system
5 Power supply arrangement
6 Any other item (details to be
given)
Subtotal

B Bulk materials
1 Piping
2 Electrical
3 Instrumentation
4 Any other item (details to be
given)
Subtotal

C Spares (details to be given)

D Erection
1 Mechanical
2 Electrical
3 Instrumentation
4 Civil Works
5 Land
6 Any other item (details to be
given)
Subtotal

E Taxes and duties

1 Ocean freight
2 Customs duty
 3 Port handling
4 Inland freight
5 Excise & CST
6 Works contract tax
7 Insurance
8 Any other applicable fax and
duty (give details)
Subtotal

Total (A to E)

Attachment 1 (e)
[see regulation 5]
Capital cost of pipelines

Sr. No. Description INR FE Total (*) Technical

Indian Foreign
Rupees Exchange
A Major Items
1 Survey and soil investigation
2 Land, ROU and crop Outer
compensation diameter
and wall
thickness
3 Line pipes
4 Line materials
5 Coating and pipe transportation
6 Pipeline Laying
7 Cathodic protection
8 OFC, telecom and
telesupervisory system
9 SCADA & APPC system
10 Power source
11 Any other item (details to be
given)
Subtotal

B Minor items
1 Ocean freight
2 Customs duty
3 Port handling
4 Inland freight
5 Excise & CST
 6 Works contract tax
7 Insurance
8 Any other applicable fax and
duty (give details)
Subtotal
Total (A +B)

(*) INR + FE converted to INR

 Attachment 1 (f)
[see regulation 5]

Profit and Loss Account (s)

Rs.
Year Year Year Year
Sr. No. Description Year 3 --------
1 2 4 25
1 Total inflows
a Revenue from natural gas
pipeline tariff
2 Total operating cost
outflows
a Consumables and chemicals
B Utilities - (Power fuel and
water)
c Salaries
D Repair and maintenance
E Gen. administrative expenses
(including bank charges on
bid bond and performance
bond as per grant of
authorization)
F Any other expenses (to be
detailed)
G Insurance (including on line-
pack volumes)
3 Profit before depreciation
interest and tax (PBDIT) (1
- 2)
4 Interest on working capital
borrowings to the extend
utilized in working capital
requirement for above
expenses (with rates)
5 Interest on term loan (with
rates)
6 Profit before depreciation
and tax (PBDT) (3-4-5)
7 Depreciation on SLM basis
and miscellaneous expenses
written off (give details of
each)
8 Profit before tax (PBT) (6-7)
9 Tax provision (provide as per
income tax rules in force)
 10 Profit after tax (PAT) (8-9)
Cash from operation (CFO)
(10+7) - To be transferred to
cash flow sheet

$ Actual or estimates, wherever applicable

(*) Excluding all direct, indirect and allocated common cost beyond transportation of natural gas
pipeline. Financial costs and selling expenses to be excluded.

Note :

1. The natural gas pipeline tariff shall be based on the actual volumes of natural gas
transported in natural gas pipeline as determined by DCF methodology adopted by
considering a PIRR, at which level the net inflows equal the net outflows over the
economic life of the project.
2. For expansion or extension of natural gas pipeline - data in the above format as
applicable for project post expansion or extension.
3. Non-operating income (such as, Interest on interest-free refundable security deposit from
PNG domestic customers) not to be considered as project inflows.
4. Modvat benefit, if available is to be reflected separately alongwith the calculations
5. Copy of Audited Profit and Loss Account to be attached wherever applicable.

Attachment 1 (g)
[see regulation 5]

Cash flow statement

Construction period Economic Life

Year 3 Year 2 Year 1 Year 1 Year 2 Year 3 -------
Sr. No. Year Year
25
1 Sources of funds
a Equity or Preference
Equity (*)
b Term Loans and
short term loans
c Cash from operations
d Bank borrowings for
working capital
e Others (please
specify)

2 Uses of funds
a Capital expenditure
 Normal/additional
b
capital expenditure
Increase or
c (decrease) in net
working capital
d Repayment of loans
Dividends to equity
e
holders
Tax on distributable
f
profits
Others (please
g
specify)

3 Cash surplus or
(deficit)
a Opening cash
balance
B Closing cash balance

(*) Redemption details to be given.

 Attachment 1 (h)
[see regulation 5]

Balance Sheet ($)

Construction period Economic Life

Year Year Year Year Year Year
Year 3 Year 1 ------
2 1 2 3 4
Assets
Gross fixed assets
Less: Accumulated
depreciation (*)
Net Fixed assets
Net current assets
Cash and bank balance
Investments
Miscellaneous fixed assets
Deferred revenue
expenditure
Others (please specify)
Liabilities
New worth
Equity capital
Preference share capital
(**)
Reserves
Debt
Rupee term loans
FC term loans
Bank borrowings for
working capital
Others

($) Actuals or estimates, wherever applicable

(*) Asset head-wise depreciation calculations to be provided
(**) To the extend non-redeemable. Redeemable preference capital to be shown under debt.

Note :

a) Copy of audited Balance Sheet to be attached, wherever applicable

 Attachment 1 (j)
[see regulation 5]

Assumptions

1. Exchange rate used for determining the capital costs in Indian currency to be indicated.

2. Format for providing annual operating cost by the entity.

Description of cost elements Rs.

A. Variable cost
1. Consumables
2. Fuel (quantity and rates)
Utilities (quantity and rates)
a) Power (*)
b) Water
c) Any other expenses(to be specified)

B. Fixed and semi variable cost

1 Salary and wages
2 General administration
3 Repairs and maintenance
4 Any other expenses ( to be specified) (£)

C. Insurance (%)
Total (A+B+C)

(*) Break-up of purchased power (over fixed charge & variable charge) & and own generation to
be provided.
($) Break -up over routine & turn around as well as function-wise over electrical, civil,
mechanical, etc. to be provided.
(£) Basis of direct & indirect administrative expenses (along with basis of allocation to be
provided).
(%) Break-up of premium on loss of profit policy, facilities & line-fill quantity to be provided.
Note
a. For each items of operating cost, detailed assumptions and working to be attached.
b. For common overheads, complete basis of appointment and allocation of costs to be
provided.
3. Project implementation schedule to be given along with break up of expenditure for each
year.
4. Loan schedule to be provided for each type of loan interest rates, repayments etc.
5. Depreciation schedule as per the Companies Act and Income Tax Act should be provided.
6. Section-wise capacity of the natural gas pipeline along with length of each section.
7. Pipeline design capacity and rated capacity of compressors to be provided.
8. Capacity utilization proposed and the basis to be provided.
9. Implementation period of project in phases to be provided.
10. Economic life of the project.
11. Applicable income tax rates and the exemption, if any available under the income Tax Act,
1961 to be provided.
12. Details of volumes of natural gas estimated to be transported in the natural gas pipeline
over the economic life along with copies of the contracts for booking pipeline capacity to be
provided in following format:
(MMSCMD)

Own Requirement Year 1 Year 2 Year 3 Year 4 ---------- Year 25

Firm Contracted
Extra capacity (*)
Total

(*) to be made available on common carrier open access and non-discriminatory basis.

13. Basis for conversation of natural gas volumes into its energy equivalence in MMBTU to be
provided.
14. All assumptions with reference to the estimates of capital or operating costs and nay other
assumption which has a material impact on the determination of the until 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 standards of The Institute of Chartered Accountants of India.
(3) Only the cost of land purchased and used for the 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 for its extension) shall be
considered only when used.
(4) Any change in the value of 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 utilized 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 should 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 as be specified in the relevant regulations
for the technical standards and specifications, including safety standards.
(b) The line-pack value of natural gas in natural gas pipeline tariff shall be
considered as a non-depreciating fixed asset 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 on 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.

[F. No. S-Admn/II/8/2008-Vol.-1]

RATAN P. WATAL, Secy.