The city gas distribution (CGD) segment has taken significant strides in the past few years. Proactive efforts are being made to expand gas demand across the domestic, commercial, industrial and transport sectors. One of the country’s largest CGD players, Gujarat Gas Limited (GGL) has a diverse customer base and presence spread across several states. At a recent India Infrastructure conference, Nitin Patil, chief executive officer, GGL, talked about the policy initiatives taken by central and state governments, the company’s performance during the current year and its future plans. Excerpts…
Government initiatives
The priority allocation of domestic natural gas for the compressed natural gas (CNG) and piped natural gas (PNG) segments has been a critical shift in policy and has helped in kick-starting progress in the segment. Several initiatives have also been taken by the government to simplify the processes for obtaining the necessary permissions and clearances. Further, there has been a transition in the role of the Petroleum and Natural Gas Regulatory Board from that of a regulator to a facilitator. The board has adopted a more collaborative approach and it is working with CGD entities to resolve outstanding issues.
Various state governments have also taken measures to drive growth in the sector and for extending support to CGD players. Gujarat has been a pioneer in creating a gas-based economy. The government has promoted natural gas as a preferred fuel and its use across various applications has grown exponentially over the past two decades. Natural gas currently holds a share of around 25 per cent in the state’s energy basket. The presence of pipeline infrastructure and LNG import terminals has enabled Gujarat to become the country’s gas hub.
Gujarat recently introduced the CNG Sahbhagi Yojana under which the government has reduced the permissions required from various authorities to set up CNG stations. The land requirements have also been eased. Also, the procurement of around 1,000 CNG buses is further expected to drive CNG volumes in the state. The Rajasthan government too has come up with a policy that ensures timely allotment of land and grant of permissions to CGD companies within a short time span of 20-30 days. Punjab has also approved guidelines to facilitate the laying of pipelines and granting of permissions. In addition, there has been increased focus on the use of cleaner fuels to reduce carbon emissions. The banning of polluting fuels such as pet coke and furnace oil in several states has benefited the gas companies. Overall, there have been improvements in the CGD ecosystem that have sped up activities in the segment.
Current performance and future plans
GGL witnessed strong performance in the first two quarters of 2019-20. The company currently has 345 operating CNG stations. It set up 29 stations in the first six months of the current financial year. Another 18 stations are ready to commence operations. While the company aims to set up 100 CNG stations across the country, it has definite plans to establish around 65 stations.
In terms of volumes, GGL’s gas sales surged to a high of 9.3 million standard cubic metres per day (mmscmd). The ban on coal gasifiers in Morbi, Gujarat, by the National Green Tribunal has been a major factor for the boost in volumes. The company also recorded strong volumes from other existing geographical areas (GAs). Further, demand from new GAs is also picking up. In the future, the company plans to maintain gas sales volumes at around 9 mmscmd.
GGL won the Narmada GA in the ninth round of CGD bidding and six GAs in the states of Punjab, Rajasthan, Haryana and Madhya Pradesh in the tenth round. It has already started domestic gas supply in Amritsar. While the company is required to install 25,000 domestic PNG connections, it sees a long-term potential of around 100,000 connections. Three online CNG stations have also been set up in the city. An online station has been commissioned in Bathinda and a mother CNG station is expected to commence operations by March 2020. In the Narmada GA, GGL has a target of setting up four CNG stations, two of which are operational. During 2018-19, GGL incurred capital expenditure of around Rs 5 billion. However, with the expansion in new GAs and setting up of more CNG stations, the capital expenditure incurred by the company is expected to increase to Rs 8 billion.
GGL is also foraying into the virtual pipeline segment or the supply of natural gas through trucks to increase penetration in areas where there is currently a lack of pipeline connectivity. It has already placed an order for eight systems that include stationary tanks, liquid dispensation systems, gasifiers, etc. It is planning to use these systems in Maharashtra, Rajasthan, Madhya Pradesh and Dadra & Nagar Haveli. However, the virtual model is economical and viable only up to a certain flow level, beyond which setting up of pipeline infrastructure is imperative.