Views of Hardip Singh Rai: “Think Gas is committed to developing the Indian CGD market”

The year 2022 presented significant challenges, including the Russia-Ukraine crisis and escalating gas prices. These factors impacted the sector’s ability to drive volume growth. In 2023, there has been a notable recovery in prices, resulting in improved outcomes following the Kirit Parikh committee’s recommendations. Continued growth has been observed in compressed natural gas (CNG) volumes, along with an increase in industrial customer connections. Additionally, the company laid approximately 800 km of steel pipelines and 1,600-1,700 km of medium-density polyethylene pipelines.

Overall, the company has around 11 city gate stations and 110 CNG stations, with currently around 30 more being branded as Think Gas stations. However, the utilisation of the operational CNG stations is still below the desired level. As a result, there will be a slowdown in the incremental addition of CNG stations, except for new areas or centres that have not yet been served.

The volume of gas sold is approximately 400,000 standard cubic metres per day of gas across all geographical areas (GAs), with the majority being utilised for CNG. Currently, gas is being supplied to about 30,000 household customers, with installation work completed for approximately 85,000 customers. The focus now is on converting these customers to use natural gas once it becomes available outside their properties. On the industrial and commercial side, there are approximately 120 industrial customers and twice as many commercial customers. The CNG segment accounts for the vast majority of the volume. Going forward, significant growth is anticipated in the industrial and commercial segment.

Driving innovation and technology

Think Gas has implemented several key practices and innovations to enhance its operations. Notably, it has introduced technologies to improve pipeline tracking efficiency. The quality construction management system digitalises the entire pipeline data, including construction details and welder qualifications, enabling precise monitoring of the network. Apart from enhancing operational efficiency, this technology also strengthens safety and quality control.

“Concerted efforts to streamline regulatory frameworks and foster policy alignment hold the key to unleashing the CGD sector’s transformative potential.”

Furthermore, Think Gas has embraced supervisory control and data acquisition on cloud, a system that enables real-time monitoring and control of the gas distribution network. This technology provides greater visibility and control, ensuring a timely response to any issues or emergencies.

In terms of infrastructure, the company utilises multi-layer composite (MLC) pipes within customer properties, replacing traditional galvanised iron pipes. Using MLC pipes as an alternative offers greater flexibility, improved aesthetics, and easier installation, providing a cleaner and more efficient solution for gas distribution within buildings. Additionally, the firm has implemented road quality markers for night-time pipeline visibility. This has enhanced safety for both operators and the public.

Policy and regulatory landscape

The year 2023 has witnessed significant policy and regulatory developments impacting the gas distribution sector. The formation of the Kirit Parikh committee played a crucial role in addressing challenges faced in 2022, particularly regarding high gas prices.

The recommendations of the committee have helped stabilise the market while also guaranteeing uninterrupted gas supply to customers, even during times when numerous CGD firms were experiencing financial losses.

A key focus area requiring attention is the integration of compressed biogas (CBG) into the CGD network. Although CBG production has the capacity to support farmers and decrease the reliance on imports, its seamless integration has been hindered by regulatory obstacles.

The sector’s growth is also dependent on policy alignment between the central and state governments. This includes the disparity in value-added tax (VAT) rates on fuel among states. VAT rates in certain states, such as Madhya Pradesh and Punjab, are approximately 14 per cent, whereas in other states, they are as low as 5 per cent. The variance in VAT rates is indicative of a broader issue in which the policies of the central and state governments fail to coincide, thereby engendering difficulties for the natural gas industry. The high VAT rates in certain states make CNG less competitive compared to diesel, hindering the conversion of industrial and commercial customers to natural gas.

Sectoral challenges

Despite the progress made, the gas distribution sector faces several challenges. One key obstacle is the slow progress in infrastructure development, particularly in the construction of CGD infrastructure, which relies heavily on steel and plastic pipelines. While steel pipelines garner significant attention due to their higher-pressure capacity and the involvement of experienced contractors, it is the widespread deployment of lower pressure plastic pipelines that raises concern. Unlike their steel counterparts, plastic pipeline laying often involves smaller, less experienced contractors who may cut corners to expedite the process. This poses significant risks, especially considering that these pipelines are often installed in residential areas. The challenge lies in effectively monitoring these operations, as the fast-paced nature of plastic pipeline laying demands extensive resources. Despite efforts to oversee these activities, the reliance on smaller contractors remains a point of concern. Their primary focus on completing tasks swiftly and securing new contracts introduces inherent risks, particularly in terms of safety and quality assurance. The lack of reliable contractors further compounds these challenges, as the few available contractors may not suffice to meet the sector’s demands across the country. This underscores the need for heightened vigilance and proactive measures to mitigate potential risks. Any lapse in safety protocols or quality standards could result in severe repercussions. This highlights the critical need to promptly and thoroughly resolve these issues.

Continued growth has been observed in compressed natural gas volumes, along with an increase in industrial customer connections.”

Policy interventions are also needed to address issues such as the GST on gas, excise duty on CNG, and the pricing of subsidised liquified petroleum gas, which affect the competitiveness of natural gas. A simplified tax structure and incentives for conversion to natural gas could significantly boost the growth of the sector.

Future plans

Think Gas is committed to developing the Indian CGD market. The company’s current expansion strategy is centred on maximising the potential of its operations in seven GAs across 11 districts. Due to this, the company does not plan to participate in any additional bidding rounds. Looking ahead, the company plans to make a shift towards maximising throughput at the existing stations, coupled with targeted customer engagement initiatives, which is likely to drive returns on capital investments. While challenges abound, the sector remains buoyant with opportunities such as carbon credits to incentivise industrial customer adoption and volume growth. Moreover, concerted efforts to streamline regulatory frameworks and foster policy alignment hold the key to unleashing the CGD sector’s transformative potential. Overall, the sector has navigated a transformative journey characterised by resilience, innovation, and strategic adaptation. Going forward, the sector is poised to contribute to India’s energy security and sustainable development objectives.