46 districts to see city gas rollout in 2015-16
As many as 46 new districts in the country would see city gas distribution networks being rolled out in 2015-16.
Downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) is already conducting the fifth round of bidding for city gas distribution in 20 districts across six states: Andhra Pradesh, Maharashtra, Uttar Pradesh, Gujarat, Karnataka and Uttarakhand. “Bidding will conclude by July-August and the sixth round would be rolled out immediately,” a government official in charge of the bidding process told FE.
The expansion offers opportunities to new players as the area is currently dominated by a handful such as GSPC Gas, GAIL, Indraprastha Gas and Adani, among others. New players such as IndianOil and Mahesh Resources are also targeting a pie of the business.
Currently, nearly 44 cities and towns in India are covered under such networks. To facilitate expansion of the cleaner fuel, the government has allocated 100% domestic gas supply for city gas usage. Petroleum minister Dharmendra Pradhan said that PNGRB has envisaged a phased roll-out for development of city gas networks in several geographical areas, depending on natural gas pipeline connectivity and gas availability.
“The geographical areas are included in bidding rounds in a phased manner… PNGRB has been considering entire districts, including small towns or less populated villages, as geographical areas for development of city gas network,” Pradhan added.
In the past, India has not been successful in expanding city gas, primarily because of scarcity of indigenous gas and hurdles to lay pipelines in crowded localities.
“Developing regulatory landscape, scarcity of gas, high gas prices and policy dynamics have delayed authorisation of entities for city gas distribution networks in cities. Non-availability of gas, its high price, delays in project execution and mounting financial burden have delayed laying of networks in authorised cities,” said Deepak Mahurkar, leader (oil and gas) at PwC India.
However, industry watchers are wary of providing cheaper domestic gas to city gas network. This is akin to subsidising the fuel and would eat into the share of other competitive fuels such as petrol, diesel and subsidised domestic cooking gas.
“India’s subsidy regime has proven that subsidy through producers (in this case suppliers-cum-producers) is inefficient in execution. It lacks the ability to target. Urea, LPG, kerosene subsidies are a case in point. Even if factors compel, a suitable mechanism to fix consumer prices is not in place. Investments based on the promise of cheaper gas and aspirations of arbitrage will prove challenging in the long term,” said Mahurkar.