In the past few years, the city gas distribution (CGD) segment has undergone significant transformation and proactive efforts have been made to expand the network. Given the rising gas demand, the segment is expected to maintain a high growth trajectory in the coming years. Several new players have entered the CGD market. One such entrant, Think Gas Distribution, aims to create an energy ecosystem that fuels sustainable development of CGD networks in the country.
Established in 2018, Think Gas is backed by leading private equity firm I Squared Capital that focuses on infrastructure investments in North America, South America, Europe and Asia. The company won five concessions in the ninth and tenth CGD bidding rounds. In the ninth round, the company won four geographical areas (GAs) – Begusarai in Bihar; Bhopal and Rajgarh in Madhya Pradesh; Ludhiana, Barnala and Moga; and Jalandhar, Kapurthala and SBS Nagar districts, in Punjab. It also won the Shivpuri GA in Madhya Pradesh under the tenth round. Further, in June 2019, it acquired a stake in an existing CGD company, Bagpat Green Energy Limited, which operates in Bagpat district in Uttar Pradesh.
As per the latest regulations issued by the Petroleum and Natural Gas Regulatory Board (PNGRB), the company has 25 years of infrastructure exclusivity and eight years of marketing exclusivity in its authorised areas. The company is paying greater attention to timely setting up of CGD infrastructure in its GAs as gas penetration is almost negligible in most of the districts except Baghpat. In fact, it is already ahead of the minimum work programme targets set by the PNGRB. Further, it also aims to make higher investments than the amounts committed to meet the PNGRB targets in order to increase penetration of gas in its GAs. With regard to infrastructure, the company has set up 15 compressed natural gas (CNG) stations since 2018. The first CNG station was commissioned in Punjab in July 2019. Another 10 CNG stations were set up in Punjab till January 2020. In addition, three stations were commissioned in Bhopal and one in Baghpat as of January 2020. At present, the company is supplying CNG to over 2,000 vehicles. It has laid 31 km of steel pipelines. It has also entered into agreements with 11 commercial and industrial establishments for the supply of piped natural gas.
Being a new entrant has allowed Think Gas to deploy the latest technologies early on. The company has introduced global best practices in safety, processes, technology and customer relationship management. It has adopted several innovative solutions to increase its operational efficiency. Solutions such as prepaid metering and smart payment methods have been starting points for the company rather than necessary developments later on to take the business forward. All the company’s gas carrying vehicles are GPS-tracked to monitor their movement on a real-time basis. A control room has been set up at the company’s headquarters in Noida for tracking and monitoring purposes. Construction activities are being mapped and monitored regularly to ensure quality of assets and timely completion of projects. While these technologies require higher initial investments, the company believes that they will help in reducing operating costs in the long term.
The CGD segment has undergone significant transformation in the past two-three years. In fact, the country has stepped into a new phase of CGD network development. Several new players have entered the sector. Further, the GAs offered under the ninth and tenth rounds are vastly different in terms of area and number of people covered, as compared to those awarded in the previous rounds. CGD players today also have greater obligations to achieve the targets with the introduction of a penalty clause by the regulatory board.
Going forward, the formulation of coherent and stable policies will play a key role in the growth of the CGD network. Further, the sector will require consolidation of assets in the coming years. At present, the assets of CGD companies are unevenly distributed making their management difficult. Consolidation of GAs with closely located assets and CGD infrastructure will help in removing inefficiencies.
Based on a presentation by Hardip Singh Rai, Chief Executive Officer, Think Gas Distribution, at a recent India Infrastructure conference