Annexure I

Major points discussed on 4^th May 2020 on the support needed from the Govt. and MoP&NG to enable the CGD sector’s revival following Covid-19 pandemic

Background :

The City Gas Distribution companies engaged in the distribution of Natural Gas to the Transport, Domestic and Industrial sector are facing a turbulent time owing to the pandemic Covid-19 situation prevailing in the Country. The impact of this is intensifying with each passing day. Given the uncertainty prevailing at the current moment as also the continuing lockdown, it is difficult to assess the economic impact for the CGD industry but it is bound to affect the progress of the various Projects in a very major way, as also pose serious cash flow and capital investment problems.  Many of the relatively new CGD companies got new GAs under round 9^th and 10^th round of bidding process, a few were in the midst of their tendering process, while a few were already engaged in execution activities, expanding their network in new GAs. Both these set of Companies had to stall their activities in view of Covid-19 pandemic. They are currently surviving majorly based on Domestic PNG sales and miniscule volume of CNG sales.

In view of the problems faced by the CGD sector, the industry urgently appeals to the Government and the MoP&NG to extend its support through fiscal assistance and  easing of procedural norms as indicated below:

Support required from Government and the MoP&NG:

1. For the allocation of APM and NAPM gas for H1 of 2020-21, quantities reported to PPAC for the period of October 2019 to February 2020 (i.e.  for 5 months) may kindly be considered which represent the actual scenario under normal operations  of CGD entities and would be a logical allocation. If sales figure of March 2020 quantities are taken into consideration, the allocation of domestic natural gas, i.e. APM & NAPM Gas for H1 of FY 2020-21 and may be even for H2 of 2020-21 would be skewed since the impact of COVID19 had drastically reduced consumption. Further, since we are still under lock down and likely to continue for sometime, the effect may spill over to H2 2020-21.

2. should direct gas suppliers and transporters to bill CGD entities only for the quantities they consumed at normal prices / rates without any additional charges like excess gas, take-or-pay, imbalance etc. This should be for a period till normal consumption resumes, i.e. officially declaring Covid-19 as a Force Majeure event for all the obligations of the parties relating to Gas supply and Transportation. 

3. As per the current norm laid down under the 9^th and 10^th round of bidding, and under Minimum Work Program (MWP) clause, heavy penalty is imposed under default clause after the first year of operation. Due to the unforeseen and extended Covid-19 situation all the successful bidders have to recast their MWP due to the variation that has grossly disturbed their initial assumptions. The complete change in the socio-economic environment due to disruption of activities including vendors, supplier and contractors. It is, therefore, proposed that a deferment of atleast 24 months in MWP be allowed post lockdown period and till the restoration of normalcy period in the industrial activities.

4. Given the almost complete shutdown in the activities and steep decline in realizations, there should not be any coercive or penal action on the CGD entities who are already facing financial strains due to poor cash flow situation under Covid-19 pandemic situation.

5. To help generate finances for investment and ease the financial stress being faced by the CGD entities, the Ministry of Petroleum and Natural Gas may consider financial assistance to the sector. This could be through creation of a special fund. This could be through funding from the OIDB and the PNGRB reserve. A relaxation/ rationalization in the Performance Bank Guarantee norms by the PNGRB as a special case would also help release some funds for the companies for investment.

6. Apart from this, there are some indirect measures which could help ease the financial stress on the companies.  As the MOPNG is aware, swift revival of CNG sales can provide a big boost to the recovery in the CGD sector and in this connection, the Excise Duty exemption can really play a major role. MoP&NG may kindly take up the issue regarding Exemption of the CGD sector from Excise Duty (14%) and a deferment of Statutory Tax compliances at least till September-December, 2020. Banks may be asked to restructure the loans and provide a moratorium on interest payments for at least another six months to help the sector to recover quickly.

7. The current lockdown has disrupted the movement of goods and labour. To enable early recovery, MoP&NG may kindly request the MHA to notify NG Pipeline construction, operation and maintenance activities in the essential business category which would facilitate issuance of e-transit pass/road permit during the Covid-19 pandemic through electronic mode.

8. We are now approaching the monsoon season and it is extremely important that work can be undertaken at the earliest possible. For this two areas of approvals, which as MOP&NG is aware, are very important, now become critical.  The first is the Safety clearances (approvals of DM NOC/ PESO)  MOP&NG may please recommend  for e-approval within 15 days of submission of on line application, complete in all respects.

9. MoP&NG may also issue advisory note to the State Governments to allow the CGD companies to continue construction during the rainy seasons also as a special case, but strictly abiding by the laid down safety protocols.

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Annexure II

List of Attendees in the web meeting held on 4^th May 2020