New Delhi: After “one paisa" bids spoilt the initial auction rounds, Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed to radically change the bidding parameters for obtaining a licence to retail compressed natural gas (CNG) and piped cooking gas in cities.
PNGRB has proposed to conduct future auctions by asking companies to quote the tariff they will charge for transportation of CNG and piped gas or piped natural gas (PNG) within the city, with lowest rate getting preference.
They would also be asked to quote the number of CNG stations and households proposed to be connected within a given timeframe, according to PNGRB’s public notice on revised bidding criteria. Besides, bidders will also have to quote how much pipeline would they lay on winning the licence.
PNGRB has so far held eight rounds of bidding where companies were asked to quote the tariff for pipeline that carries gas within the city limits. This 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 tariff to win licences.
PNGRB in the notice invited comments on the draft bidding regulations by 2 February after which it will finalise the criteria. Entities having experience of at least one year in operation and maintenance of a city gas distribution (CGD) network and having “adequate" number of technically qualified personnel would be eligible for bidding, it said.
Companies having a networth of no less than Rs150 crore can bid for cities with population of 50 lakh and more while the same for cities with population of 20 lakh to 50 lakh has been proposed at Rs100 crore. The networth eligibility goes down with population, with a Rs5 crore networth firm being eligible to bid for cities that have less than 10 lakh population.
PNGRB proposed that any entity security CGD licence would have to “enter into a firm natural gas supply agreement" with a natural gas producer or marketer “in a transparent manner on the principle of ‘at an arm’s length’". The authorised entity has to achieve financial closure within 270 days from date of grant of license.
The winning company would have 8 years of marketing exclusivity in the given city. Current licenses provide for 5 years of exclusivity. Last week, Oil minister Dharmendra Pradhan had stated that PNGRB would offer 100 city gas distribution (CGD) licences for bidding on a new model within a month. Last few rounds of CGD have evoked lukewarm response. The fourth round was altogether cancelled while the fifth saw 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 CGD infrastructure in 11 smart cities under smart city mission received only 1 bid. Seven cities were offered in the 8th round last year but not all cities have been awarded so far.