Indraprastha Gas Ltd (IGL), incorporated in 1998 on a Supreme Court mandate, has been supplying compressed natural gas (CNG) to the transport sector and piped natural gas (PNG) to households and commercial customers in Delhi and the NCR towns of Noida, Greater Noida and Ghazibad. With the domestic gas shortage easing on Reliance Industries? starting production from the D6 block in the Krishna-Godavari basin, IGL is looking to expand its services beyond the NCR. In an interview, IGL managing director Rajesh Vedvyas spoke to FE?s Noor Mohammad about the company?s agenda: Excerpts:

You are into the city gas business. What is the growth outlook for this business in India?

Earlier, gas shortage was limiting the city gas business in the country. But this problem has largely been resolved, with increased availability of gas from domestic sources. Infrastructure is the only constraint now.

You are running the city gas business in Delhi from 1999. But your PNG coverage of the national capital is still limited. Why so?

The focus of the initial ten years was on the CNG business. We had an allocation of 2 million standard cubic metre per day (mmscmd) of gas. But we were not allowed to sell PNG beyond 0.1 mmscmd. But now that the gas availability has improved, we plan to expand our PNG network in the city in a big way.

We have planned a capital expenditure of Rs 3,000 crore over the next five years, most of which will go into expanding the PNG network. Delhi is divided into 70 charge areas (same as assembly constituencies). Of these, we are present in 53 areas. We expect to cover the remaining areas by 2012.

What are IGL?s core strengths in the city gas business?

No company in India has the capability to execute city gas projects the way IGL does. We have contacts with producers, suppliers and transporters. We can command and demand the best rates from them.

We maintain high standards of operational safety and have a good track record. We are investing Rs 3,500 crore over the next five years in the city gas business. No other company has lined up investment plans of a comparable size. Besides, IGL is a zero-debt company.

How is your city gas business growing in Delhi?

We are currently supplying 2.4 mmscmd gas in Delhi, which we expect to go up to 6.5-7 mmscmd by March 2016.

Would you like to expand beyond the NCR. If so, what will be your strategy?

We are interested in bidding for city gas projects outside the NCR. We would like to bid for four to five cities through the joint venture route, mostly in the northern region. We will be very choosy about our city gas projects. Well-established and reputed partners from the same sector would be our preference. Even as we plan to expand, we want to do justice to NCR.

What are the key risks in this business?

We do not have a uniform demand. Our gas consumption is lower over the weekend and so, we are not able to offtake the entire gas allocation. Similarly, we do not have any control over the gas demand. But as per the gas purchase and transportation agreements signed with RIL and GAIL, respectively, we are liable to pay penalty in either case. Earlier, RIL and GAIL were imposing heavy penalties on us if we failed to comply with the contractual provisions. But this problem has been resolved to a large extent, with the seller and transporter allowing us 20% variation from the contracted quantity.

What are the growth prospects of IGL?

The next five years will a golden period for IGL. Our turnover was Rs 1,213 crore in 2009-10. This should go up to Rs 5,000 crore by the end of 2015-16.

How is the growth in your CNG business?

We had 163 CNG stations at the end of March 2008. Now we have 241. Our compression capacity was 20.76 kg/day, which increased to 36.40 kg/day in 09-10.

What is the current sector-wise mix of IGL?s revenue?

About 89% of our revenue comes from the transportation sector, 8% from commercial customers and the rest from the household segment.