The country’s oil marketing companies Indian Oil Corporation (IOC), Bharat Petroleum Corporation and Hindustan Petroleum Corporation, state-run gas marketer GAIL India, private player Adani Group and incumbent Indraprastha Gas (IGL) put in the bids for city gas distribution (CGD) licences as 86 permits for selling compressed natural gas (CNG) and piped cooking gas in 174 districts in 22 states and union territories went under the hammer on Tuesday. However, after showing interest in the bidding process, the Reliance Industries-BP combine is learnt to have dropped out of the race at the last moment.
More than 400 bids have been received for 86 geographical areas (GAs) offered in the ninth CGD licensing round. These GAs will cover 24% of India’s area and 29% of the country’s population. In other words, they cover 174 districts across 22 states and union territories. Currently, 91 GAs with 24% of the population have piped natural gas (PNG) facility. A licence winner under the CGD round will have the exclusive right to offer PNG and CNG in a particular GA for eight years, extendable by two years.
Adani Gas bid for 32 cities on its own and another 20 cities in an equal joint venture with state-owned IOC, PTI reported.
Quoting unnamed sources, the agency also reported that IGL, which retails CNG in the national capital region, put in bids for 13 cities, and Essel Infraprojects put in a total of seven bids. The market share of OMCs in fuel retailing could shrink over time in case they do not get into CGD. “LPG (liquefied petroleum gas) competes with PNG and availability of CNG affects demand for petrol and diesel. That is why they (OMCs) would want to offer these services,” said a source. The three OMCs together control around 95% of the fuel retailing business in the country.
While over Rs 18,000 crore has so far been invested in the CGD business in the country, the latest round will result in investments to the tune of Rs 70,000 crore. The GAs offered under the ninth round includes several key urban centres — Bhopal, Visakhapatnam, Ahmednagar, Ludhiana, Jalandhar, Aurangabad, Alwar, Kota, Chennai, Coimbatore, Salem, Allahabad, Faizabad, Amethi, Raebareli, Dehradun and Burdwan — which are also major consumption hubs.
According to sources, while at least one bid has come for each GA, 60 GAs have received multiple bids with some urban centres such as Chennai attracting 10 or more bids. According to a note released by rating agency Crisil on Monday, the CGD businesses in large cities are more profitable and licences for these are expected to draw greater bidding interest. “Increased participation from public sector oil majors is likely given the government impetus and higher weightage given to number of new domestic connections in the bidding criteria,” said the note.
The Petroleum And Natural Gas Regulatory Board has asked bidders to quote the number of CNG stations they will set up and domestic cooking gas connections they plan to provide in the first eight years of operation. Under the new norms, maximum weightage of 50% has been given to the number of piped gas connections proposed. The bids received will be opened between July 12 and 18. However, the licences will be awarded by September given technical and financial bids will have to be evaluated to select the winning bids.
The existing CGD operators include IGL and GAIL Gas, which serve a population of 24 crore through 42 lakh domestic connections and 31 lakh CNG vehicles. The government aims to connect 1 crore households with piped gas by 2020, which is in line with increasing the share of natural gas in the primary energy basket of the country to 15% from the current 6% over the next few years.