India’s City Gas Distribution Dream Demands End-To-End Push – Opinion by Suresh P Manglan

Last year was a watershed, in a way, for the re-emergence of city gas distribution (CGD) in India. While it took the country several decades to create distribution opportunities in 92 geographical areas (GAs), the 9th round of CGD bidding concluded in 2018 alone saw bidding of 86 GAs comprising 174 districts covering 26 per cent of India’s population.

The dynamism in government’s resolve to extend the benefits of piped gas and compressed natural gas (CNG) to large masses and maintain India’s penchant to adopt a healthier energy mix is indeed remarkable.

But, we all know that there are a few long-winding bends between what appears on the drawing board and end-users’ aspirations. The good part of the success of 9th round of bidding is that the overall sentiments are warm and there is a genuine desire to ascertain all aspects posing challenge in the fast-track development of CGD infrastructure in the country. In the existing 92 GAs, so far 1,450 CNG stations have been set-up and piped natural gas (PNG) connections to 46 lakh homes have been accomplished.

Although the numbers are not meant to undermine the robust work done until now, it certainly appears challenging when viewed in comparison to the task in hand. The commitment by all the winners of 9th round is to provide PNG to 2.2 crore homes, setting up 4,600 CNG stations and laying of 12,000 km to 15,000 km of steel pipeline in the new 86 GAs.

Further, the Petroleum and Natural Gas Regulatory Board (PNGRB) has already begun the 10th round of bidding for additional 50 gas distribution licenses in 124 districts, which will get awarded by the end of February this year. That would extend the CGD coverage to 70 per cent of India’s population. Thus, there will be simultaneous development of massive CGD infrastructure of providing PNG connection to close to five crore homes, setting up about 8,000 to 10,000 CNG stations and laying of 25,000 km to 30,000 km of steel pipeline in the next eight years. This requires close coordination among all the stakeholders – government, PNGRB, authorities, transporters and gas suppliers, CGD entities and vendors/contractors. It would require out-of-the-box measures to overcome the challenges coming in the way of fast-track development of infrastructure.

Proactive measures to fast-track implementation

CGD Development Council: CGD project execution simultaneously in 400 plus districts by several entities in different states shall require close coordination and fast decision-making by all to resolve ongoing issues facing the development. Setting up of a CGD Development Council comprising key stakeholders such as PNGRB, Ministry of Petroleum and Natural Gas (MoPNG)/Central government, state governments, transmission companies and CGD entities could be a game-changing decision in this direction. The council should be empowered to deliberate all critical issues creating bottlenecks in the development of CGD infrastructure and provide timely decisions binding upon all including laying down of uniform policy on grant of permissions and charges applicable across all states on the theme of One India-One Policy.

The permissions from the different state and central authorities and varying high charges levied by these authorities are primary challenges testing CGDs service providers. Presently, some states seek annual lease rentals plus property tax on length of pipelines laid, which adversely affects the capacity of CGDs to develop the infrastructure. The council shall also help to streamline frameworks in line with government’s initiative of ease of doing business.

Development of CGD ecosystem: The council shall also be able to help all CGDs in development of CGD ecosystem in the GA including allotment of land parcels for city gas stations and CNG stations at preferred rates, cutting down the lag time in achieving time-bound connectivity of GAs with the transmission lines, which in many cases is as high as 70-80 km.

Growth boosters

Bringing natural gas under the ambit of GST: This will help allowing CGD entities and micro, small and medium enterprise (MSME) customers to avail input tax credit. Presently, the goods and services tax (GST) paid on the materials and services becomes part of cost for CGDs as the GST is not applicable on the sale of natural gas. Similarly, for MSME, value-added tax paid on the purchase of natural gas becomes the cost to MSME.

Make Mobile CNG Dispensing Units realties: One of the key changes in the 9th and 10th rounds is coverage of vast area in a GA. This leads to challenges for CGD entities to create land-based CNG stations in a stipulated time. Instead setting up mobile CNG stations are more feasible, which the government must encourage.

Availability of natural gas for small scale industries and MSMEs: The government has taken a major step in assuring supply of natural gas for homes and CNG stations at uniform price. This has changed the face of CGD entities and is the key reason for the resounding response to the 9th bidding round. Similar steps are needed to make natural gas available for SSI/MSMEs at a uniform price. This will significantly boost CGD development and provide cleaner environment in the GA.

Conversion of public transport buses to CNG and procurement of CNG buses in future: Reciprocating the increasing availability of CNG infrastructure in many states/GAs, there is a need for the state governments to boost the efforts in making public transport infrastructure CNG compliant. One-time investment to convert fleets to CNG would help in cutting down air pollution significantly and would also save public money. Similarly, where CGD business is in operations, the states undertaking it should be mandated to procure all buses in future with CNG compatibility.

Low penetration and very low per capita consumption for PNG home consumers: As per popular sentiments, PNG connections for homes is often used to measure success for CGD but here are some ground realities worth comprehension. Low and slow penetration (50 per cent to 60 per cent even for long established CGDs) and equally low consumption (less than 15 standard cubic meter per month) makes it difficult for CGDs to recover capex and opex involved. Besides usage of natural gas for cooking, PNGRB may explore other options such as district heating and district cooling to enhance per capita consumption. To begin with, this should be promoted at the time of development of new residential neighbourhoods. Also, in order to increase the penetration of PNG connections, PNGRB may advocate for making PNG connections mandatory by municipal authorities while granting new building approvals in areas where CGD entity has been in existence for two to three years, particularly, for high rise buildings.

Creating choices for the customers: There should be a facilitating environment to allow PNG customers to choose among the smart/AMR/prepaid/IOT or high aesthetic meters and CGD entity should be permitted to pass the cost to the customers for add-on choice.

Leapfrogging benefits in store

Nearly seven out of 10 people in India would directly or indirectly experience the benefit from the combined impact of development of CGD networks in their homes, businesses or vehicles. It is expected to deliver PNG connection to 5 crore homes, setting up 10,000 CNG stations; and laying 25,000 km to 30,000 km of steel pipelines by CGD entities alone in the next few years bringing an investment of about $20 billion to $25 billion. These are mind-boggling numbers capable of taking India to a new level of development.

Indian vendors, contractors, small and medium-scale entrepreneurs, start-ups etc, would be key beneficiaries of the CGD development. This will also push ‘Make in India’ and Skill India initiatives. There will be major boost to employment generation of our youth, experienced professionals, skilled, semi-skilled and unskilled labour force on year-on-year basis in the coming decade.

Today, 14 out of 15 most polluting cities in the world are in India. We can improve this scenario by increasing the share of gas in the energy market from 6.2 per cent to about 15 per cent to 20 per cent.

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Source:Energy ET

Image Courtesy:Modern Dipomacy

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