The Petroleum and Natural Gas Regulatory Board (PNGRB), which came into existence in 2007, was empowered to authorise natural gas pipelines and city gas distribution (CGD) networks under Section 16 of the PNGRB Act in 2010. Since then, 47 CGD entities have been authorised by the board and many more are expected to be authorised in subsequent bidding rounds.
Prior to the establishment of the PNGRB, 33 CGD entities were operational in the country. Of these, 28 have been authorised by PNGRB and the remaining five are in different stages of being authorised.
Under the PNGRB Act, the board authorises entities to develop a CGD networks in specified geographical areas (GAs) through a competitive bidding process. The GAs are bid out in a phased manner depending on the natural gas pipeline connectivity.
The overall CGD business in the country is sluggish. While the key conditions to improve the business scenario are the availability of affordable and assured natural gas supply and pipeline connectivity, the cost and price competiveness of piped natural gas (PNG) is also essential.
As compared to its global counterparts, the pipeline scenario in the country appears bleak. From a regulatory point of view, one of the major concerns for CGD entities is a mismatch in the parameters considered by the PNGRB and CGD players for evaluating bids. As a result, sufficient time is not given to the latter to evaluate the GA before participating in the bidding process. Another major concern is the absence of accurate information on the cost of surveying the GA and of providing pipeline connectivity.
Though a number of GAs have been bid out, those receiving one or zero bids is on the rise. As per the minimum work programme of a gas distribution company, 5 per cent of the total number of households in a GA needs to be covered in the first five years of operations. However, due to a lack of monitoring, the all-India average is just 1.97 per cent against over 60 per cent coverage of domestic liquefied petroleum gas (LPG). This drops further to just 1.13 per cent once unauthorised CGD entities are included. In absolute terms, no domestic PNG connections have been provided since 2011.
At present, the PNG segment faces stiff competition from liquid fuels such as domestic LPG (particularly, subsidised LPG). In successive bidding rounds, the number of GAs awarded has reduced significantly. In order to reduce the gap between PNG and LPG uptake, a more realistic and rigorous approach has to be followed for the selection/identification of GAs and the evaluation of their economic potential. Above all, a natural gas infrastructure master plan needs to be formulated for the development of a gas grid in the country. This will not only provide a macroeconomic view of the PNG potential in different states but will also serve as a benchmark for CGD entities by creating a national data repository and standardising the data set.
The government is taking new initiatives in order to overcome regulatory challenges. A new concept has been proposed which involves bringing areas neighbouring an existing CGD network (in a district) under its purview.
Recent policy measures on gas allocation and the downward revision of natural gas prices have had a positive impact on price competitiveness. As a result of these measures, the natural gas price has come down from $5 in 2014 to $2.5 (October 2016-March 2017). Also, the gas subsidy has been increased, thus adding to price competitiveness. However, facilitating last-mile connectivity by providing a conducive regulatory and policy environment is one of the main challenges that need to be addressed.
Based on a presentation by Dr Basudev Mohanty, Member, PNGRB, at a recent India Infrastructure conference
