The 'use or pay' penalties of Rs 849 crore that customers are anticipated to pay for neglecting to utilise the terminal as high international prices cut imports were the key reason for Petronet LNG's quarterly profit increase of 3% to Rs 1,180 crore. Revenue for the October-December quarter rose 25% from a year earlier to Rs 15,776 crore. The capacity utilization at its Dahej terminal, the country’s largest and busiest gas import terminal, fell to 68% during the quarter from 86% in the corresponding period of last year, reflecting the sharp drop in imports.
“Prices were hovering around $30-35 per mmBtu in the international market. Affordability (for Indian customers) was not there. All cargoes were getting diverted to Europe,” said A K Singh, the
managing director of Petronet LNG. LNG prices have now fallen below $20 per mmBtu and the utilisation at Dahej terminal too has improved to above 80% now, he added. Due to the customers' contractual obligations to pay for the capacity reserved at the import terminal even when it is not used, Petronet has recorded the revenue as a "use or pay" charge, increasing its profit. The "use or pay" for the quarter of October through December was Rs 849 crore as opposed to Rs 415 crore in the same period last year.
The auditors flagged that Petronet hasn’t yet received the ‘use or pay’ charge of Rs 415 crore for last year. “We are working with defaulters and working out a redressal mechanism for this default,” said Singh. Every year the ‘use or pay’ charges are recognised only in the October-December quarter for the entire calendar year.
Singh said ‘use or pay’ charges have become significant for them only in the last two years, first due to Covid, which cut demand and impacted imports, and then due to sky-high prices that impinged on the affordability of Indian gas customers. Petronet is looking to lock long-term LNG supplies, Singh said.
The company will have an additional 9 million tonnes of capacity per year after the capacity extension at Dahej and the construction of a new terminal on the east coast, he added. They will tie volumes either directly or through their promoters, who are the largest state-run oil and gas producers. Shares in Petronet finished 0.07% lower at Rs 222.80 per share. The benchmark Sensex finished down 0.39 percent.
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