Regulator rejects GAIL’s plea for recovery
New Delhi: The downstream regulator has rejected GAIL’s plea seeking to recover from its customers the compensation it paid to victims of 2014 pipeline fire that killed 29 in Andhra Pradesh. The state-run pipeline operator had recently proposed that the amount spent on compensation and rehabilitation of the victims and their families be considered as operating expenditure for the determination of tariff of its KG Basin Natural Gas Pipeline Network. Petroleum and Natural Gas Regulatory Board (PNGRB), the regulator, didn’t accept GAIL’s plea. “Opex amounting to Rs 8.60 crore incurred towards ‘disbursement of compensation /rehabilitation expenditure’ after the fire incident took place on 27.06.2014 during the FY 2014-15 has been disallowed,” the board said in its tariff order on June 29. In its order, the board didn’t elaborate on the reasons for rejection of GAIL’s plea. But an executive well-versed with the workings of PNGRB said accepting GAIL’s proposal would have sent a conflicting signal. “PNGRB had penalised GAIL earlier for the lapses that led to the pipeline fire, and now it couldn’t be seen supporting the company in recovering compensation from customers,” the executive said. “GAIL can’t make customers pay for its own mistakes. It should pay from its own profit. It gets 12% return on the capital employed,” he added. GAIL didn’t respond to ET’s emailed query on why it considered appropriate to shift compensation and rehabilitation expenses on to its customers. A government probe following the 2014 pipeline explosion had found GAIL responsible for many lapses. Based on the official report and a subsequent explanation by GAIL, PNGRB decided in July 2015 to impose a fine of Rs 20 lakh on the pipeline operator. GAIL paid the fine. GAIL had admitted to many lapses highlighted in the probe findings, including transporting wet gas through a pipeline meant only for dry gas, not providing gas dehydration unit despite promising to do so, and not complying with norms needed to keep the pipeline fit for transportation, the regulator had said in the 2015 order. “M/S GAIL has also defaulted in compliance of the various provisions with respect to design, maintenance, operation, inspection, integrity management, quality of gas etc of the PNGRB Regulations,” the regulator said in the 2015 order. Following the incident, GAIL spent hundreds of crores to replace older pipelines with new ones besides taking many other safety measures.