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Gas Retailers Seek Bounty in Blue-Sky Push in Indian Capital

A ban on dirty fuels in areas surrounding Delhi is set to spur sales at gas retailers.

Gas Retailers Seek Bounty in Blue-Sky Push in Indian Capital
A liquefied petroleum gas (LPG) cylinder stands connected to a stove in India (Photographer: Prashanth Vishwanathan/Bloomberg)

(Bloomberg) -- A ban on dirty fuels in areas surrounding one of the world’s most polluted cities is set to spur sales at India’s natural-gas retailers.

India’s top court last week banned the use of petroleum coke and furnace oil in areas around the Indian capital, which is battling alarming levels of air pollution that’s risking human health. The ban, which takes effect from Wednesday, is set to increase sales at India’s city natural gas distributors as they seek to convert small businesses that use the cheaper but more polluting fuels to cleaner natural gas, according to company officials.

Gas Retailers Seek Bounty in Blue-Sky Push in Indian Capital

“We have zeroed in on more than a hundred industries that can be quickly converted into gas users,” E.S. Ranganathan, managing director of Indraprastha Gas Ltd., said in a phone interview. Indraprastha Gas, which supplies compressed and piped natural gas in Delhi and its suburbs, expects to add much as 30 percent, or about 150,000 cubic meters a day, to industrial sales within six months. Natural gas sold to industries and businesses currently contribute about 11 percent to its average daily sales of 4.6 million cubic meters, according to its website.

A ban on the two cheaper fuels in Delhi has been in effect since 1996, according to environmental non-profit Centre for Science and Environment. The latest court order banned the use of petcoke and furnace oil in parts of Haryana, Uttar Pradesh and Rajasthan that surround Delhi. While the ban bolsters the use of natural gas, a lack of officials to enforce it could be a challenge, according to K. Ravichandran, senior vice-president at credit assessor ICRA Ltd., the local unit of Moody’s Investors Service.

“If the ban is enforced in letter and spirit, we expect an increase of at least 50 percent in volumes in Faridabad over the next six months,” said Rajeev Sharma, Chief Executive Officer of Adani Gas Ltd., a unit of Adani Enterprises Ltd. “The gains will not be sudden. The users will need some time to install internal pipelines and burners before switching to gas.”

The company is expecting a gain of at least 200,000 cubic meters in daily volumes as a result of the ban, Sharma said. Haryana City Gas Distribution Ltd., which operates in Gurgaon and sells about 25,000 cubic meters a day of gas to industries and businesses, is expecting additional demand of 100,000 cubic meters, Chief Executive Officer Rahul Chopra said in an interview.

“Gurgaon houses a lot of small industries and we have presence everywhere,” Chopra said. “There are garment makers, bottlers and automobile component suppliers. We are discussing with the industrial groups to expedite conversion to gas.”

Indraprastha Gas shares ended 0.2 percent lower at 1,582.80 rupees in Mumbai, while the benchmark S&P BSE Sensex gained 1.2 percent.

Wider Ban

India is building gas pipelines and new import facilities as it seeks to more than double the share of gas in its energy mix to 15 percent to cut its import bill and push Prime Minister Narendra Modi’s efforts to slash emissions by a third by 2030.

India and China accounted for more than half of the 4.2 million premature deaths globally because of air pollution in 2015, according to a report released in February by Boston-based Health Effects Institute. Including Delhi, the country had 14 of the 30 worst-polluted cities in the world, according to World Health Organization data released last year.

“We expect the court order to encourage a ban of these fuels in other parts of the country,” ICRA’s Ravichandran said. “We can’t let industries burn whatever passes as fuel.”

To contact the reporters on this story: Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net, Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net.

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Alpana Sarma, Ruth Pollard

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