The city gas distribution (CGD) sector supplies gas to four categories of consumers – piped natural gas (PNG) to households, industrial and commercial consumers and compressed natural gas (CNG) to the transport segment. The CGD infrastructure in India has made significant headway; from 34 geographical areas (GAs) in 2014, the CGD network is being expanded to 288 gas authorities across the country, covering nearly 50 per cent of the geography and catering to nearly 70 per cent of the Indian population.
Indian Infrastructure takes a look at the infrastructure progress in the CNG and PNG segments in India…
Progress under the CNG network
Work on developing the infrastructure for CNG fuelling stations is in full swing. The number of CNG stations has grown from 1,233 in 2016-17 to 3,101 in 2020-21, recording a compound annual growth rate (CAGR) of 25.93 per cent. More than 65 per cent of the CNG stations are located in four states – Gujarat (779 stations), Maharashtra (456 stations), Uttar Pradesh (453 stations) and Delhi (453 stations). As of April 2020, the total number of CNG vehicles in the country stood at 3,375,718. In terms of the number of CNG vehicles too, Maharashtra (1,017,397 vehicles), Gujarat (964,448 vehicles) and Delhi (775,142 vehicles) lead the other states.
As per the minimum work programme commitments for new GAs awarded under bidding rounds 9 and 10, the number of CNG stations is expected to reach over 10,000 by 2028. These stations are expected to cater to a fleet of 15 million CNG vehicles. Given that CNG vehicles are more cost effective than their petrol counterparts, it is expected that the transition towards this green mode of transport could lead to potential savings of nearly Rs 2 trillion.
Progress under the PNG network
The PNG segment has also witnessed significant growth in the past few years. The number of PNG connections has grown from 3.61 million in 2016-17 to 7.86 million in 2020-21, recording a CAGR of 21.45 per cent. Growth in the segment has been primarily driven by the rise in the number of household connections, which increased from 3.58 million in 2016-17 to 7.82 million connections in 2020-21.
Commercial and industrial PNG infrastructure has also made progress; however, its share in the total PNG connections continues to remain small at barely 1 per cent. While the number of commercial connections in the country has grown from 26,131 in 2016-17 to 32,339 in 2020-21, the number of industrial connections has grown from 7,601 in 2016-17 to 11,803 in 2020-21. In a major development, the 450 km Kochi-Koottanad-Mangaluru natural gas pipeline was inaugurated on January 5, 2021. The pipeline is expected to provide 2.1 million PNG connections. It is part of the government’s “one nation-one gas grid” policy.
Much like the CNG segment, Gujarat (2.48 million), Maharashtra (1.97 million), Delhi (1.07 million) and Uttar Pradesh (0.96 million) hold a major share in the total PNG connections in the country. Meanwhile, as per the commitments made in the ninth and tenth biding rounds, the number of PNG connections in the country is expected to increase by 42 million over the next 8-10 years.
Regulatory support
In the past few years, the government has taken several initiatives to uplift the CGD sector, drive natural gas demand and ensure faster infrastructure development. In November 2020, the Petroleum and Natural Gas Regulatory Board (PNGRB) published the Petroleum and Natural Gas Regulatory Board (Access Code for City or Local Natural Gas Distribution Networks) Regulations, 2020. The access code aims at establishing industry-wide transparent and uniform principles for allowing entities to gain or allow access to pipeline systems and CGD networks.
In September 2020, the PNGRB came up with new regulations to regulate the establishment and operation of the gas exchange and clearing corporations. In another development, the Ministry of Environment, Forest and Climate Change identified about 1,644 industrial units spread across 50 industrial areas in Delhi to switch over to PNG in December 2020. The decision has been taken on account of high levels of pollution in the city and would ultimately promote the use of natural gas. The Delhi Pollution Control Committee was also directed to inspect and identify industries using unapproved fuel and to take stringent penal action in case of non-compliance.
Impact of Covid-19
Like all other infrastructure sectors, the outbreak of the Covid-19 pandemic and the subsequent lockdown posed multiple challenges for the CGD sector. It severely impacted the pace of project implementation due to nonavailability of material and manpower. In a bid to provide relief to CGD players, in September 2020, the PNGRB released a notice on the detailed procedure to be followed for considering force majeure claims for the time extension of CGD entities. The guidelines were released after the lockdown was imposed to contain the spread of Covid-19, which delayed/halted city gas projects.
Further, on November 5, 2020 the PNGRB issued an order granting more time to 41 CGD players setting up projects in 185 GAs to meet their network roll-out commitment. A large number of these 185 GAs had received authorisation in biding rounds 9 and 10. The time granted varies from 129 days to 251 days across different GAs, depending on the duration of the Covid-19 lockdown. Amidst a surge in cases during the second wave of Covid-19, the PNGRB may grant another extension to about 185 CGD projects. The progress of many CGD projects has been hampered again as most states have imposed a lockdown to stem the spread of the virus.
What lies ahead?
The scale of bidding rounds 9 and 10 has highlighted the government’s vision of creating CGD infrastructure across the country. The CGD sector has been growing by leaps and bounds in recent years. The PNGRB is preparing to come out with round 11 of CGD bidding, after which 50-100 additional districts will be added to the CGD network. The bidding round is being planned around a new pipeline being constructed from Angul in Odisha to Mumbai in Maharashtra, to ferry natural gas between the east and west coasts.
In line with the government’s plans to move towards a gas-based economy, the Union Budget 2021-22 announced plans to roll out CGD networks across 100 additional districts over the next three years. The budget has also proposed an independent gas transport system operator for facilitating and coordinating the booking of common carrier capacity in all natural gas pipelines on a non-discriminatory, open access basis. Further, in a bid to increase the share of natural gas, the union finance ministry announced a pipeline project for Jammu & Kashmir.
At present, the share of natural gas in the country’s energy sector stands at 6 per cent, which the government plans to increase to 15 per cent by 2030. Looking at the number of domestic gas pipeline projects at various stages of implementation, steady government support and expansion plans of CGD networks, the infrastructure is expected to witness significant development in the near future.