Indraprastha Gas (IGL) targets to supply piped natural gas (PNG) for cooking to all potential households in the national capital region (NCR) over the next five years, said Narendra Kumar, managing director of the company ? a joint venture between GAIL (India), BPCL and Delhi government. This is in sync with Prime Minister Narendra Modi’s move to make PNG more popular, which would reduce LPG usage and cut down the government?s oil subsidy burden.
Currently, IGL supplies PNG to nearly 4.8 lakh households in Delhi and its adjoining areas in Noida and Ghaziabad while there are about 315 compressed natural gas (CNG) filling stations for automobiles.
Kumar told FE there was potential to add nearly 15 lakh consumers. However, there were many areas where PNG cannot be provided owing to safety hazards and the lack of feasibility to lay pipelines. Moreover, the absence of single-window clearance is a major challenge in the expansion of city gas networks.
The government has decided to allocate domestically produced natural gas to the city gas distribution (CGD) sector. Currently, in the lowest consumption slab, PNG costs 10-12% more than a 14.2-kg subsidised LPG cylinder. IGL charges Rs 27.30 per scm for consumption up to 36 scm in 60 days. For consumption beyond this limit, PNG is charged at Rs 48.75 per scm. On the other hand, a domestic subsidised LPG cylinder costs Rs 414 in the national capital after a discount of Rs 427.82 per cylinder.
IGL reported a net profit of Rs 114 crore in Q1FY15. Gross margin, which increased to Rs 9.58/scm, was aided by a slight decline in LNG prices to $ 13.91/mmbtu. Opex, which was flat in the past three quarters, rose 5.3% quarter-on-quarter to Rs 3.47scm due to seasonality.
?With implementation of the government notification (100% domestic gas) to CNG and PNG customers, the attractiveness of CNG has increased dramatically. We now see increased demand growth coming from higher addition of CNG/PNG,? Edelweiss Securities said in a recent report.
IGL, which has bought 50% in Kanpur-based Central UP Gas (CUGL), for Rs 70 crore, is now closing a similar deal with Pune-based Maharashtra Natural Gas (MNGL).
?We have followed another route for expansion where we are buying into existing CGD networks. This year, we have decided to take 50% in MNGL for Rs 190 crore. We are also studying some other cities (for buying equity),? said Kumar.
“While near-term volume growth is a concern, we expect growth to revive in the medium to long term by a stable CNG price outlook for five years, post the scheduled domestic gas price hike leading to higher private car conversion and city buses addition that is pending for tendering,” Motilal Oswal said in a recent report.