Bidding for city gas distribution contracts sees strong response
The contracts entail supplying piped cooking gas and CNG to 174 districts across 22 states and seven Union territories
New Delhi: Around 400 bids were received for 86 contracts under India’s largest city gas distribution (CGD) licensing round, the Petroleum and Natural Gas Regulatory Board (PNGRB) said on Tuesday.
These 86 geographical areas (GAs) on offer under the ninth bid round are expected to attract investment of around Rs.70,000 crore. The contracts entail supplying piped cooking gas and compressed natural gas (CNG) to 174 districts across 22 states and seven Union territories and comes against the backdrop of the National Democratic Alliance government pushing for a gas-based economy.
News wire agency PTI reported that Adani Group emerged as the top bidder eyeing 52 cities, with GAIL Gas Ltd putting in bids for close to 30 cities. The report added that Indraprastha Gas Ltd (IGL), which retails CNG in the national capital region, put in bids for 13 cities and Essel Infraprojects Ltd put in a total of seven bids.
Spokespersons for Adani Group, IGL and GAIL (India) Ltd declined to comment.
“The group has considered 7-8 GA, which have strategic advantage and complement Essel Infra’s existing businesses. Essel won Bagpat in round 8 bidding and since then it has been building capabilities for such projects. Entering this sector was part of our commitment towards building modern and sustainable infrastructure for progressive India,” said Brajesh Singh Bhadauria, chief executive officer, Essel Utilities.
“More than 400 bids were received in respect of all the 86 GAs offered in the 9th CGD bidding round. The technical bids would be opened between 12 July 2018 and 18 July 2018. During roadshows, it was announced that the successful entities would be finalized by October 2018 after technical and financial evaluation of bids. However, PNGRB is now trying to expedite the process,” the regulatory board said.
After the contracts are awarded, the government aims to expand CGD coverage in nearly 50% of the total 640 districts in the country and to about 50% of India’s population. The government plans to connect 10 million households to piped natural gas by 2020.
Analysts were enthused by the response.
“Crisil expects the 9th round to receive far better response than before because of revised bidding norms, and the push from the government through favourable policies. These include marketing exclusivity period of eight years (extendable by two years, compared with five years earlier), tariff floors to discourage unviable bids, removal of additional bid bond requirement and evaluation of bids based on higher infrastructure creation,” ratings agency Crisil Ltd wrote in a report on Tuesday.
India has CGD networks in 91 GAs operated by 36 firms. With 16,500km of pipelines in operation, 4.2 million domestic consumers and 33,000 industrial and commercial consumers, 19% of India’s population has been covered by the CGD network.
“As part of the bidding process, PNGRB organized 16 roadshows in major cities across India and internationally in Dubai during May-June 2018. The last date of bid submission was 10 July 2018,” PNGRB said.
Gas accounts for around 6.2% of India’s primary energy mix as compared to a global average of 24%. The government plans to increase this to 15% by 2030. India’s gas demand is expected to be driven by the fertilizer, power, city gas distribution and steel sectors.
“Since CGD businesses in large cities are more profitable, licences for them are expected to draw greater bidding interest. Bidders are also expected to favour GAs adjacent to existing pipeline networks. 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,” the Crisil report added.
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