Industry
Insurance surety bonds proposed to be added as guarantee instrument for pipeline, city gas projects
Summary
The bonds will ensure timely completion and vary in amount. Stakeholders are invited to comment on the proposal by April 2025 to boost natural gas usage.
New Delhi: The petroleum and natural gas regulator has proposed to add insurance surety bonds to bank guarantees and demand drafts as a financial instrument to ensure the timely completion of city gas distribution (CGD) projects and pipelines for petroleum products.
The bonds would work as a financial guarantee, with the insurance company issuing the bond acting as the guarantor.
“The bid and performance bond shall include insurance surety bond from insurance companies in India/demand draft/pay order/bank guarantee from any scheduled bank of India for the amount as specified in the regulation," the Petroleum and Natural Gas Regulatory Board (PNGRB) said in a draft amendment to norms for authorising entities to lay, build, operate or expand petroleum and petroleum product pipelines.
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If the commissioning deadline of the CGD network is missed or if service obligations are not met, the insurer would pay the regulator the assured bond amount.
The bond will remain "in full force initially for three years from date of issue and will be extendable three months before expiry of the same, for next three years and so on until the period of authorization of the CGD network in terms of authorization letter," the regulator proposed.
The guarantee amounts for a CGD network in an area with a population of less than 100,000 would be ₹1.5 crore. For areas with a population of 100,000 to 250,000, the bond amount would be ₹3 crore. The highest slab is ₹50 crore for an area with a population of 5 million or more.
Targeted coverage
For petroleum product pipelines, the bond amount would be ₹2 crore for pipelines of up to 250 km in length, ₹8 crore for pipelines from 251 km to 1,000 km. For pipelines 1,001 km or longer, the bond amount would be ₹15 crore.
The regulator has sought comments from stakeholders on the proposal by 15 April 2025.
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The PNGRB has so far authorized 307 geographical areas across the country covering almost the entire mainland to expand the coverage of CGD networks. The target for entities authorized by PNGRB is to provide 126.3 million piped natural gas connections and establish 18,336 CNG stations by 2033.
CGD entities had provided 14.2 million domestic PNG connections and established 7,513 CNG stations across the country as of 31 December 2024, the standing committee on petroleum and natural gas said in its latest report.
"In this regard, the committee observed that the implementation of city gas distribution network projects has been relatively slow and pro-rata targets regarding minimum work programme have been revised on account of covid, delay in commissioning of natural gas pipeline, etc," the committee said in the report tabled in parliament on 20 March.
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The panel recommended that the ministry of petroleum and natural gas and the regulator should make all out efforts to enhance the usage of CNG/PNG in cities by focusing on expanding coverage and actual availability so that the objective of the government to increase the share of natural gas from the current level of 6% to 15% by 2030 in the overall energy mix of the country is achieved.
