‘IGL looking to diversify beyond CNG and PNG’
Indraprastha Gas Ltd is looking to diversify beyond its existing city gas distribution territory and move towards the small power generation business. In an interview to BusinessLine, IGL Managing Director ES Ranganathan charts the way forward for the city gas distribution company. Edited excerpts:
What are your projections for natural gas emerging as an alternate transport and cooking fuel?
The government has given a big thrust to natural gas and is making efforts towards increasing its share from the current 7 per cent to 15 per cent in the overall fuel basket of the country.
The move towards becoming a gas based economy can be seen from the push being given to developing a national gas grid by connecting all corners of the country.
City Gas Distribution (CGD) is slated to take off in many cities connected through the grid, with respective state governments wanting speedy rollout of CNG and PNG in their states.
Other than that, natural gas is economical. Compared with petrol, it is 60 per cent cheaper and 25 to 30 per cent cheaper than diesel.
Gas will also emerge as an important feed stock for power in industries situated in metros and suburban areas.
Besides, because of environmental concerns, the government may ban use of petcoke and fuel oil by industries. While the ban has been implemented in Delhi, industries in NCR are still using the fuel. For IGL, curb on use of petcoke and fuel oil will be good.
We expect to grow at a steady rate of 10 per cent in the next two to three years simply from the existing markets we operate in. If we get a new geographical area, the growth will be higher.
Can we expect a tweaking of the upfront payment costs to replace them with a monthly rental to promote use of PNG and waiving it off once the existing ₹5,000/connection levy is met?
We are exploring various options so that one-time payment should not be a deterrent. IGL spends around ₹17,000 to ₹22,000 per connection as installation cost alone and yet we take only ₹5,000 per connection as an upfront refundable security for the service.
There are some areas such as Ghaziabad where the ₹5,000 upfront cost is a deterrent for consumers. We have enabled this to be collected in 10 EMIs of ₹500 each. In addition to this, the gas usage charges are levied.
The total outgo of around ₹650 a month is expensive, compared with the approximately ₹400 a month expenditure on LPG.
So, we are thinking of charging a nominal monthly rent of ₹50 and then completely waiving off the security deposit. The board will shortly look into it and maybe within a month there will be a decision on this.
What price range do you expect CNG and PNG to be at? Will you maintain current margins?
While spot prices are linked to crude oil, the domestic gas prices are not exactly linked to crude.
We have generally found that domestic gas price does not immediately follow the crude price on a linear basis. Of course, if crude price goes up, domestic gas price in India will follow suit eventually. So, if and when the gas price goes up, we will pass it on to consumers.
What per cent of IGL’s gas is from domestic market?
The current mix of IGL comprises 89 per cent domestically produced gas and 11 per cent imported.
What is the number of new PNG connections you are looking at?
The government has set a target of adding 1.5 lakh new PNG connections for the current fiscal and we expect to add 1 lakh to 1.2 lakh connections. We are targeting bulk connections for the Army (28,000 connections) and Air Force (18,000 connections) housing societies.
Approvals are under way for nearly 50,000 connections and they will be added either in the current or in the next fiscal.
We hope to do an average of 1.5 lakh new PNG connections annually over the coming 2-3 years.
What are the new regions IGL is looking at to expand its footprint?
Under the eight round of bidding for networks, the government will put up Karnal, Ambala, Baghpat and Bulandshahr. We hope to get at least two or three of these. The government also has this new policy of green corridors wherein they want to have at least one CNG station every 50 km along highways connecting Delhi.
They have identified seven highways such as Delhi-Chandigarh, Delhi-Agra, Delhi-Kanpur, Delhi-Jaipur, Delhi-Haridwar. And we expect to get at least 50 per cent of the business on these routes.
What are the new businesses IGL looking at?
We have to diversify for a good portfolio.
Focus is on building alternate businesses such as solar and also explore gas engine generators segment.
Today an apartment complex having diesel generator set is charging ₹19/kWh, the unit is running at ₹18/kWh. This can be replaced with a gas engine generator.
At the current gas price, the cost of power will be near ₹12/kWh. To switch the customers from existing diesel generators, we are offering a service model.
A power generation company will put up the generator; IGL will supply gas and charge them as per their consumption with no monthly rental.
We are in talks with independent energy into the business of small power generators to develop this business model.
For Rewari, we will go to all industries with this model. We can also go for 5 MW captive gas-based power generation for larger housing societies.
Builders are making housing societies with 1 lakh houses and require 50 MW power to cater to them. In the absence of a high tension line, builders have to opt for multiple 33 kV connections to meet the requirements.