Gas Distribution & Marketing Cos In A Sweet Spot Thanks To Govt’s Push For Clean Fuels

Gas Distribution & Marketing Cos In A Sweet Spot Thanks To Govt’s Push For Clean Fuels

The results for the eighth round of city gas distribution bidding for Karnal, Kurukshetra, Ambala and South Goa were disclosed during the week. Organized development of network through bids and government’s initiatives to promote cleaner fuels has facilitated rapid expansion of city gas distribution in Indian cities in the last decade. Despite the heady growth, we still see significant opportunities for demand growth which puts the gas distribution & marketing companies in a sweet spot.

The bidding

As per historic norms, this bidding round also saw companies submitting bids for one paisa as network tariff. The winners have been decided on the basis of the performance guarantees submitted by them. Based on value of performance bonds IGL (Indraprastha Gas) has won the bid for Karnal (at Rs 306 crore), Indian Oil-Adani Gas bagged the deal for South Goa (at Rs 403 crore), and Ambala-Kurukshetra licence would be awarded to HPCL-Oil India (at Rs 303 crore). By next month, the licences are expected to be formally awarded to the respective companies by Petroleum & Natural Gas Regulatory Board (PNGRB). The bids for three more cities Yanam, Bulandshahar and Baghpat are still pending and are expected to be disclosed soon.

The background

City gas distribution network is the downstream gas retail network in India which broadly consists of CNG stations, cooking gas pipelines and retail market for industrial demand. The sector is highly regulated and the rights for developing the network are awarded based on geographical areas via a bidding process by PNGRB. Seven rounds of bidding have been conducted over the past 8 years under PNGRB and CGD network is active or developing in 74 cities currently (few cities had CGD networks prior to the formation of PNGRB). Read More…

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