Step­ping On The Gas:

The ninth round of CGD auc­tion gets ro­bust re­sponse and has­tens In­dia's shift to­wards a cheaper, eco-friendly, gas-based econ­omy.

India Business Journal - - CONTENTS - IBJ BUREAU

The ninth round of CGD auc­tion gets ro­bust re­sponse and has­tens In­dia's shift to­wards a cheaper, eco-friendly, gas-based econ­omy.

The Adani Group, led by bil­lion­aire Gau­tam Adani, bagged the most num­ber of li­cences to re­tail gas in 22 cities in the lat­est round of city gas dis­tri­bu­tion (CGD) auc­tion. State-owned Bharat Petroleum Cor­po­ra­tion's (BPCL) unit and Tor­rent Gas emerged as the other big win­ners in the re­cently-con­cluded, ninth round of CGD bid­ding.

The ninth round of bid­ding for CGD was launched on April 12 for de­vel­op­ment of city gas net­works for 86 ge­o­graph­i­cal ar­eas (GAs). The GAs com­prised 174 dis­tricts (156 com­plete and 18 par­tial), spread over the coun­try's 23 States and Union Ter­ri­to­ries (UTs).

"Based upon the bid eval­u­a­tions the PNGRB (Petroleum and Nat­u­ral Gas Reg­u­la­tory Board) ap­proved is­sue of Let­ters of In­tent (LoI) to the suc­cess­ful bid­ders for 78 GAs," the PNGRB said in a me­dia re­lease is­sued last month. The sec­tor reg­u­la­tor also added that bids for the re­main­ing eight GAs were be­ing eval­u­ated and their out­come would be an­nounced shortly.

Win­ning bid­ders

Adani Gas, a part of the Adani Group, has won rights to re­tail com­pressed nat­u­ral gas (CNG) to au­to­mo­biles and piped nat­u­ral gas (PNG) to house­holds and in­dus­tries in 13 cities on its own. Be­sides, the com­pany has bagged rights to sell gas in an­other nine cities, in­clud­ing Al­la­habad, in a joint ven­ture with State-owned In­dian Oil Cor­po­ra­tion (IOCL), in the coun­try's big­gest, CGD bid­ding round so far.

Ac­cord­ing to the PNGRB's re­lease, IOCL, on its own, won rights to seven cities, in­clud­ing Coim­bat­ore and Salem in Tamil Nadu and Guna in Mad­hya Pradesh. Bharat Gas Re­sources, a unit of BPCL, won li­cence for 11 cities, like Ame­thi and Rai Bareli in Ut­tar Pradesh and Ahmed­na­gar in Ma­ha­rash­tra, while Tor­rent Gas made nine win­ning bids that in­cluded the ones for Al­war in Ra­jasthan, Mo­rad­abad in Ut­tar Pradesh and Karaikal in Puducherry.

State-run gas util­ity GAIL's re­tail­ing arm, GAIL Gas, man­aged rights for four cities, in­clud­ing Dehradun. In­draprastha Gas, the com­pany that re­tails CNG in the na­tional cap­i­tal, won city gas rights for Meerut and Muzaf­far­na­gar in Ut­tar Pradesh.

"Ac­cord­ing to the com­mit­ment made by var­i­ous en­ti­ties in the 78 GAs ap­proved for is­suance of LoIs in ninth CGD bid­ding round, 1.53 crore do­mes­tic PNG con­nec­tions and 3,627 CNG sta­tions for the trans­port sec­tor will be in­stalled largely dur­ing a pe­riod of eight years up to Septem­ber 30, 2026," the PNGRB has said. It has also added that a to­tal of 400 bids were re­ceived for the 86 per­mits on of­fer.

As many as eight cities re­ceived sin­gle bids. Only IOCL had bid for Au­rangabad in Bi­har and Rewa in Mad­hya Pradesh. Sim­i­larly, only Adani Gas had of­fered to sup­ply gas for Bala­sore in Odisha, GAIL Gas' bid for Gan­gan in Odisha, Bharat Gas Re­sources' bid for Bi­dar in Kar­nataka and Ame­thi in Ut­tar Pradesh, the IOCL-Adani com­bine's in­ter­est in Al­la­habad in Ut­tar Pradesh and Gu­jarat Gas' bid for Nar­mada in Gu­jarat were the other cities that had re­ceived singe bids. The high­est num­ber of 15 bids was re­ceived for Srikaku­lam, Visakha­p­at­nam and Viziana­garm dis­tricts.

When the bid­ding round had closed in July, Adani Gas, IOCL and BPCL were the top bid­ders. Of the 86 cities of­fered for re­tail­ing of CNG to au­to­mo­biles and cook­ing gas to house­holds in the CGD auc­tion, IOCL had bid for 34 cities on its own and an­other 20 in part­ner­ship with Adani Gas, which had put in bids on its own for 32 cities.

In the same round of CGD auc­tion, Bharat Gas Re­sources had bid for 53 cities, while GAIL Gas had put in of­fers for 34 cities. Gu­jarat-based Tor­rent Gas had evinced in­ter­est for 31 cities, while Gu­jarat Gas had put in of­fers for 21 cities. Petronet LNG, In­dia's largest liq­ue­fied nat­u­ral gas (LNG) im­porter, had sought to foray into CGD busi­ness by bid­ding for li­cence in seven cities, while In­draprastha Gas had put in bids for 11 cities.

Changed pa­ram­e­ters

Prior to the ninth round, 92 GAs were awarded to com­pa­nies, like In­draprastha Gas and GAIL Gas, which are serv­ing 24 crore peo­ple, 42 lakh do­mes­tic con­sumers and 31 lakh CNG ve­hi­cles. Of th­ese, 56 GAs were awarded through eight bid­ding rounds and the rest on gov­ern­ment nom­i­na­tion.

The ninth round was be­ing held on changed pa­ram­e­ters af­ter one­paisa bids spoilt the ini­tial auc­tion rounds. In this round, bid­ders were asked to quote the num­ber of CNG sta­tions to be set up and the num­ber of do­mes­tic cook­ing gas con­nec­tions to be given in the first eight years of op­er­a­tion.

In the pre­vi­ous eight rounds, bid­ders were asked to quote only the tar­iff for the pipe­line that car­ries gas within the city lim­its. The bid­ding cri­te­ria did not in­clude the rate at which an en­tity would sell CNG to au­to­mo­biles or PNG to house­holds us­ing the same pipe­line net­work, lead­ing to com­pa­nies of­fer­ing one paisa as the tar­iff to win li­cences.

In the new guide­lines, a max­i­mum weight of 50 per cent had been given to the num­ber of piped gas con­nec­tions pro­posed in eight years from the date of au­tho­ri­sa­tion as com­pared to 30 per cent ear­lier. The num­ber of CNGdis­pens­ing sta­tions pro­posed to be set up had been as­signed 20 per cent weight.

Length of the pipe­line to be laid in the GA and the tar­iff pro­posed for city gas and CNG had been as­signed 10 per cent weight each. Be­sides, a floor tar­iff of Rs 30 for city gas and Rs 2 per kg for CNG had been put in order to de­ter bid­ders from quot­ing the un­vi­able tar­iff of 1 paisa per unit.

Ear­lier, CGD au­tho­ri­sa­tion had been given by the PNGRB for 92 GAs, cov­er­ing 124 dis­tricts, spread over 23 States and UTs. Th­ese GAs cov­ered 20 per cent of In­dia's pop­u­la­tion and 11 per cent of its ge­o­graph­i­cal area. In ad­di­tion, CGD op­er­a­tions are be­ing car­ried out in five dis­tricts, au­tho­ri­sa­tion for which is ei­ther un­der con­sid­er­a­tion of the PNGRB or is sub ju­dice. "With the com­ple­tion of the ninth bid­ding round, CGD would be avail­able in 178 GAs, com­pris­ing 280 dis­tricts, spread over 26 States and UTs, cov­er­ing more than 50 per cent of In­dia's pop­u­la­tion and 35 per cent of its ge­o­graph­i­cal area," notes the PNGRB.

The gov­ern­ment is tar­get­ing to more than dou­ble the share of nat­u­ral gas in the pri­mary en­ergy bas­ket from 6.2 per cent at present to 15 per cent within a few years. This bid­ding round is also aimed at meet­ing Prime Min­is­ter Naren­dra Modi's tar­get of giv­ing piped cook­ing gas con­nec­tion to 1 crore house­holds, roughly triple the cur­rent size, by 2020.

Once the bid­ders start op­er­at­ing in their re­spec­tive cities, it will help in cre­at­ing ro­bust in­fra­struc­ture by bring­ing in­vest­ment of about Rs 70,000 crore and gen­er­at­ing em­ploy­ment on a large scale. More­over, the spread of CGD net­work will play a sig­nif­i­cant role in achiev­ing a shift to­wards a gas-based econ­omy, with nat­u­ral gas as the next-gen­er­a­tion, cheaper and en­vi­ron­ment­friendly, fos­sil fuel.

In­dia is tar­get­ing to more than dou­ble its share of nat­u­ral gas in the pri­mary en­ergy bas­ket from 6.2% to 15% in a few years.

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