The central government aims to make India a gas-based economy by boosting domestic production and buying cheap liquefied natural gas. It also aims to rebalance its energy mix by focusing on renewable sources. The government has set a target of increasing the share of gas in the primary energy mix from 7 per cent at present to 15 per cent by 2030. With the loosening up of regulations by the Petroleum and Natural Gas Regulatory Board (PNGRB) and successful tenth PNGRB bidding round, 228 geographical areas (GAs) have been brought under the city gas distribution (CGD) network, covering 70 per cent of country’s population and approximately 53 per cent of the area. With the eleventh bidding round expected to be announced in April 2020, the regulator is working towards opening up more areas for GGD development.
IGL’s current business
Indraprastha Gas Limited (IGL) is currently operating at nine GAs – Delhi, Noida, GautamBuddh Nagar, Ghaziabad, Rewari, Gurugram, Karnal, Shamli and Muzaffarnagar. These GAs had been allocated to IGL in the first nine rounds of CGD bidding. In the tenth bidding round, it was awarded three new GAs – Ajmer, Pali, Rajsamand; Kanpur, Fatehpur, Hamirpur; and Kaithal. IGL’s existing infrastructure comprises 519 compressed natural gas (CNG) stations, and 1,217,259 domestic, 4,504 small commercial, 187 large commercial and 2,860 industrial connections. Its pipeline infrastructure spans 12,525 km of medium density polyethylene (MDPE) pipelines and 1,064 km of steel pipelines. Further, work is under way for laying steel pipeline networks in the new GAs awarded under the tenth bidding round. On the performance front, IGL’s sales grew at a rate of 14 per cent in 2018-19. Further, its return on capital employed has risen consistently over the past few years, standing at 27 per cent in 2018-19.
Expansion plans
In light of the government’s renewed focus on the gas sector, IGL is expanding its CGD network in existing as well as newly awarded GAs. It has defined its expansion plan for new GAs on the basis of the minimum work programme (MWP) committed to the PNGRB during the bidding process. However, the MWP is not IGL’s sole target, as it plans to accomplish more in the stipulated time period. It has planned a capex of Rs 17.52 billion for 2020-21. The highest capex is planned for Ajmer (new GA), followed by Delhi and Gurugram. IGL plans to incur a cumulative capex of Rs 130 billion by March 2024.
Key issues and challenges
Despite a number of favourable regulatory dev-elopments, the CGD segment continues to face some inherent issues. One of the key issues is the lack of support from state governments in terms of making land available for setting up CNG stations. Further, the absence of a joint working committee comprising central and state government representatives has resulted in huge time delays between the planning and execution of projects. Also, the involvement of multiple landowning agencies results in unnecessary delays in land acquisition. Therefore, the segment needs constructive reforms on both the policy and regulatory fronts. Besides, there is a need to promote research and development activities to ensure the use of better technologies and processes to improve performance and ensure gas conservation. Further, innovative designs and business models need to be explored and deployed. There is also an urgent need to ensure local availability of equipment and services.
Based on a presentation by Manjeet Singh, Senior Vice President, Project Engineering and JV Coordination, IGL