City Gas Retailing: Adani Bids For 52 Cities, GAIL Gas For Nearly 30; RIL-BP Joint Venture Abstains
Adani Group today emerged as the top bidder for city gas retailing licences.
Adani Group today emerged as the top bidder for city gas retailing licences, eyeing as many as 52 cities, while the Reliance-BP combine dropped out at the last moment, sources said.
Adani Gas Ltd. bid for 32 cities on its own and another 20 cities in equal joint venture with state-owned Indian Oil Corporation Ltd, sources privy to the development said. GAIL Gas Ltd, the city gas distribution arm of state-owned GAIL India Ltd, put in bids for close to 30 cities, sources privy to the development said.
Bidding for the biggest city gas distribution licensing round, offering 86 permits for selling CNG and piped cooking gas in 174 districts in 22 states and union territories, closed today.
India Gas Solutions Pvt Ltd – the 50:50 joint venture of U.K.’s BP Plc and Reliance Industries Ltd., looked closely at foraying into city gas distribution but dropped out at the last moment, the sources said. IGSPL, which was formed to retail natural gas in India, looked at licences for 15 cities but did not place any bid, they added.
- Indraprastha Gas Ltd., which retails CNG in the national capital region, put in bids for 13 cities, they said.
- Essel Infraprojects Ltd has put in a total of seven bids.
- Other subsidiaries of GAIL, Mahanagar Gas Ltd and Gujarat State Petroleum Corp too bid for the licence.
As many as 86 geographical areas, made by clubbing adjacent districts, are on offer in the ninth city gas distribution bidding round. The geographical areas cover 24 percent of the country’s area and 29 percent of its population.
The round is likely to attract investments of Rs 70,000 crore, according to the Petroleum and Natural Gas Regulatory Board.
Ambitious Target
The government is targeting to raise the share of natural gas in primary energy basket to 15 percent from 6 percent at present, within a few years.
The bid round is also aimed at meeting Prime Minister Narendra Modi's target of giving piped cooking gas connection to 1 crore households, roughly triple the current size, by 2020.
The city gas distribution licences on offer are for Bhopal in Madhya Pradesh; Ahmednagar in Maharashtra; Ludhiana and Jalandhar in Punjab; Barmer, Alwar and Kota in Rajasthan; Coimbatore and Salem in Tamil Nadu; Allahabad, Faizabad, Amethi and Rai Bareli in Uttar Pradesh; Dehradun in Uttarakhand and Burdwan in West Bengal.
Prior to the ninth round, 91 geographical areas were awarded to firms like Indraprastha Gas and GAIL Gas, which are serving 240 million population, 42 lakh domestic consumers and 31 lakh CNG vehicles. Of these, 56 geographical areas were awarded through bidding rounds and the rest on government nomination.
The latest round is being held on changed parameters after one-paisa bids spoilt the initial auction rounds.
Bidding Requirements
Bidders have been asked to quote the number of CNG stations to be set up and number of domestic cooking gas connections to be given in the first eight years of operation. In the previous eight rounds, bidders were asked to quote only the tariff for the pipeline that carries gas within the city limits. These bidding criteria did not include the rate at which an entity would sell CNG to automobiles or piped natural gas to households using the same pipeline network, leading to companies offering one paisa as the tariff to win licences.
In the new guidelines, maximum weightage of 50 percent has been given to the number of piped gas connections proposed in eight years from the date of authorisation, as compared to 30 percent earlier.
The number of CNG dispensing stations proposed to be set up has been assigned 20 percent weightage. Length of the pipeline to be laid in the geographical areas and the tariff proposed for city gas and compressed natural gas have been assigned 10 percent weightage each.
Also, a floor tariff of Rs 30 for city gas and Rs 2 per kg for CNG has been put in order to deter bidders from quoting unviable tariff of 1 paisa per unit.
Companies having a net worth of not less than Rs 150 crore can bid for cities with a population of 50 lakh and more while the same for cities with population of 20 lakh to 50 lakh has been proposed at Rs 100 crore.
The net worth eligibility goes down with population, with a Rs 5 crore net worth firm being eligible to bid for cities that have less than 10 lakh population.
Last few rounds of city gas distribution have evoked a lukewarm response. The fourth round was altogether cancelled, while the fifth saw a sparse response.
The sixth round of bidding for 34 cities in 2015 got bids for only 20. The seventh round of bidding done to set up city gas distribution infrastructure in 11 smart cities under smart city mission received only 1 bid. Seven cities were offered in the eighth round last year but not all cities have been awarded so far.