Stage looks all set for doubling city gas distribution

Multiple bids likely under the ongoing round of auction

The petroleum and natural gas regulator expects multiple bids for at least 90 per cent of the area on offer under the ongoing bidding round for city gas licensing, which is expected to double the volume sold through the city distribution networks in India.

Through the current round of bidding, city gas distribution (CGD) volumes are expected to increase from 25 million metric standard cubic metres per day (mmscmd) to 50 mmscmd in five years.

The government has put on block 86 geographical areas covering 174 districts that may see an investment of around ~700 billion. “This is the biggest CGD round the country has ever seen. We expect to receive multiple bids for 90 per cent of the areas on offer,” D K Sarraf, chairman, Petroleum and Natural Gas Regulatory Board (PNGRB), told Business Standard in an interview. The bidding would close on July 10 and the final allotment of areas may happen by end- October.

All public sector undertakings are likely to put in bids in this round, said another official in the know.

He added while the previous eight PNGRB rounds and pre-PNGRB areas put together covered around 19 per cent of the country’s population and 11 per cent of the geographical area, the current round itself will cover 29 per cent of the population and 24 per cent of the area. Based on the current road map, gas distribution in these areas is likely to kick off by April 2019.

“Special focus has been given to encourage smaller players through a transparent bidding process. We have also kept a floor tariff of ~30 per million metric British thermal unit for city gas and ~2 per kilo for compressed natural gas (CNG),” Sarraf added.

The selected bidders would get the rights to sell CNG and piped cooking gas in the areas under offer.

The bidding round is part of the overall strategy by the government to raise the share of natural gas in India’s energy basket. “Currently, it is a mere 6.2 per cent, compared to a global average of 24 per cent. We want the share of natural gas to be around 15 per cent,” he said.

The marketing exclusivity period of companies is increased to eight years, compared to five in the earlier rounds.

“We are also looking to create proper infrastructure in place to ensure the availability of gas,” he said. To link the eastern region to the national gas grid, the government is working on the ~129.4-billion Urja Ganga Gas Pipeline Project now.

Urja Ganga is also looking at creating CGD networks in seven cities - Varanasi, Bhubaneswar, Cuttack, Kolkata, Patna, Ranchi, and Jamshedpur. It may also revive fertiliser units at Barauni in Bihar, Sindhri in Jharkhand, Talcher in Odisha, and Gorakhpur in Uttar Pradesh.