GAIL shares dropped 6% after the Petroleum and Natural Gas Regulatory Board (PNGRB) approved a smaller-than-expected tariff hike. The regulator sanctioned a 12% increase to Rs 65.69 per MMBtu, far below the 33% hike GAIL had sought.
GAIL (India) Ltd on Friday (November 28) saw its shares drop sharply in early trade, slipping as much as 6.3% to Rs 172.22 on the NSE. The decline came after the Petroleum and Natural Gas Regulatory Board (PNGRB) approved a pipeline tariff hike that was significantly lower than what the state-owned company had sought.
Tariff hiked, but far below GAIL’s expectations
PNGRB has raised the natural gas pipeline tariff from Rs 58.60 to Rs 65.69 per MMBtu. While the revision offers some relief, it is far short of GAIL’s request for a hike to Rs 78 per MMBtu.
Adding to this, the revised tariff will only kick in from January 1, 2026, instead of January 1, 2025, as proposed by the company. The next detailed review is now scheduled for April 1, 2028.
The regulator’s decision is a setback for GAIL, which has been pushing for a meaningful correction to recover rising operating costs and support further expansion across its 10-pipeline network, responsible for carrying nearly 90% of India’s gas volumes.
What GAIL had projected earlier
Back in March 2025, GAIL Chairman Sandeep Kumar Gupta had said the company was expecting up to a 35% rise in the integrated pipeline tariff. Such a hike, he had noted, could boost GAIL’s pre-tax earnings by almost Rs 3,400 crore annually.
At that time, the levelised tariff stood at Rs 58.61 per MMBtu, and the company formally filed for a revision to Rs 78 per MMBtu with the regulator in August 2024.
For analysts, a tariff hike was long overdue. GAIL’s regulated tariffs haven’t been updated since 2018, even though its pipeline grid has expanded significantly and capital expenditure has been rising. Under current rules, tariff reviews must be spaced at least two financial years apart unless exceptional changes justify an earlier reassessment.
Brokerages react: cautious optimism, but disappointment too
Global brokerages delivered a mixed verdict on PNGRB’s move.
Citi, in its note, said the 12% tariff increase, from January 2026, is below expectations. Analysts had assumed a 15% rise, while GAIL itself had sought a 33% jump.
However, Citi believes the stock may still react positively. The move, it said, could help fast-track the implementation of the unified tariff regime, which would be beneficial for downstream players like IGL.
PNGRB has explained that the smaller hike is meant to “smoothen the impact” and avoid a sudden surge for customers. The regulator clarified that full adjustments to all cost parameters will be taken up during the next review in FY28.
UBS, meanwhile, expressed disappointment. The brokerage noted that a 12% announced increase does not translate into a 12% realised gain for GAIL.
According to UBS, the current revision reflects changes only in two parameters:
- Rs 5.16 per MMBtu due to higher system-use gas (SUG)
- Rs 1.92 per MMBtu due to a lower volume divisor after new capacity determinations
The regulator deferred reviewing all remaining parameters until FY28, saying a full adjustment now would trigger a steep tariff hike and potentially burden consumers.