Govt seeks to bring states on board for piped gas project
IGL, which is a private entity, is promoted by state-run energy majors Bharat Petroleum Corporation Ltd (BPCL) and Gail India Ltd with equal shareholding of 22.5% each.
The government has roped in states to expedite projects worth about Rs 90,000 crore to directly supply piped natural gas to about 40 million households, and it has nudged Indraprastha Gas Ltd (IGL) to set up a Rs 250-crore gas equipment manufacturing unit to halt the influx of Chinese meters, people familiar with the development said.
For the first time, the ministry of petroleum and natural gas will hold a conference of all stakeholders, including state governments, this week to resolve the contentious issue of land rights, a state subject, which is a major roadblock in creating underground pipeline infrastructure for city gas distribution (CGD) projects, a person with knowledge of the matter said on condition of anonymity.
The ministry has also prompted state-run promoters of IGL to quickly set up a manufacturing facility under a joint venture with a global technical expert to locally meet the demand of about 40 million meters in the next four-five years, he added.
IGL, which is a private entity, is promoted by state-run energy majors Bharat Petroleum Corporation Ltd (BPCL) and Gail India Ltd with equal shareholding of 22.5% each. Balance equity in the company is held by banks, financial institutions and the public.
“India is taking all necessary steps to usher in a gas-based economy and at the same time, encouraging domestic companies to localise manufacturing of equipment to boost the economy and generate employment. Supply of PNG [piped natural gas] to kitchens and CNG [compressed natural gas] to vehicles is part of the strategy,” a second person, who works for the petroleum ministry, said on condition of anonymity.
IGL managing director ES Ranganathan confirmed the development. “We have to meet a demand of at least 40 million meters in the next seven years. It is a good opportunity to set up a meter manufacturing unit under a joint venture soon. We plan to invest about Rs 100 crore in plant and machinery and about Rs 150 to Rs 200 crore as working capital,” he said. Currently, China is the bulk supplier of the meters.
He said that the venture will start by June this year, locally assembling imported components, and full-scale manufacturing will begin from January 2021. “Joint venture with a foreign partner is required mainly for technology knowhow,” he added.
The petroleum ministry official quoted above said the government will encourage other public sector companies and domestic private firms to manufacture equipment locally, as they have an opportunity to tap investments worth Rs 1,94,666 crore in the oil and gas sector by 2025. The road map was unveiled by finance minister Nirmala Sitharaman as part of the Rs 105 lakh crore planned infrastructure projects on December 31 last year.
“An announcement to this effect is expected on Thursday at the national conclave on emerging opportunities in natural gas sector,” the second person said. The conclave is expected to be inaugurated by home minister Amit Shah and attended by oil minister Dharmendra Pradhan, senior officials from states, regulators, and industry bodies.
So far, 5.5 million domestic households are connections with piped gas in the country. The target is to add another 40 million households by 2027, the two people mentioned above said. Currently, city gas projects are underway in 232 geographical areas covering more than 400 districts across 27 states and Union Territories.
Vijay Kumar Gupta, former central council member of the Institute of Chartered Accountants of India (ICAI) said: “It is a good strategy of the Centre to rope in states to avoid unnecessary delays in getting regulatory clearances, a state subject. The government plans to spend about Rs 1.95 lakh crore in development of oil and gas infrastructure. The share of CGD alone is expected to be over Rs 90,000 crore. This is the time when the government should encourage domestic investors to set up manufacturing facilities, which will boost the sagging economy.”
India’s gross domestic product (GDP) grew at 4.5% in the July-September quarter (Q2 2019-20), the lowest since March 2013. According to the Central Statistical Office’s (CSO) first advanced estimates, India’s GDP is expected to grow at 5% in 2019-20, a 10-year low.