Adani Gas Limited (AGL) is one of the biggest private players in the city gas distribution (CGD) segment. The company and its joint venture, Indian Oil-Adani Gas Private Limited, have been allocated 38 geographical areas (GAs) by the Petroleum and Natural Gas Regulatory Board, with each company receiving an equal number of GAs. Of the 406 districts to be covered for providing piped natural gas, over 17 per cent (71 districts) come under the purview of the two companies.
In an interview with CGD India, Suresh P. Manglani, Chief Executive Officer, Adani Gas Limited (AGL), spoke about the current status of CGD networks operated by AGL, impact of Covid-19, future expansion plans, key challenges facing the CGD sector and its future outlook…
Q1. What is the current status of the CGD networks operated by AGL with respect to CNG stations, PNG consumers, etc.?
AGL as a standalone company has 19 GAs and possesses another 19 GAs in a joint venture with Indian Oil Corporation Limited. Of the 19 GAs owned by Adani Gas, 14 are currently operational. The group currently runs CGD networks at Ahmedabad, Vadodara, Faridabad and Khurja. Besides, it has won rights to set up CGD networks in 15 more GA’s. AGL’s network size currently stands at 7,600+ km pipeline and 121+ CNG stations catering to more than 440,000+ households, 1,450+ industrial units and 2,900+ commercial units.
The ongoing pandemic has had an adverse effect on AGL’s operations – sales volumes went down, construction activities were halted and the gas volumes dropped significantly. However, AGL was quick to respond and adapt to the changed requirements. As a result of its efforts, it is currently operating close to the pre-Covid levels in Northern India, with overall volumes being somewhere around 80-85 per cent of pre-Covid levels.
Q2. What are the company’s future network expansion plans?
The company has set a target of increasing the no. of CNG stations from current 121 to approx. 175 during 2020-21. While the prevailing situation has posed some challenges in procuring equipment but AGL has ensured that the supply chain does not suffer by placing orders well in advance. The company recognises the importance of ancillary industries in the CGD sector and has a vendor development team that approaches budding entrepreneurs. The company is willing to provide technical support to upcoming vendors.
Q3. What are some of the key issues and challenges faced by the CGD sector?
In order to cope up with the challenges, the company has developed a strategy focusing on a large number of new GAs. AGL is setting up seven satellite LNG plants, of which the order for five plants has already been placed. Thus, the company’s main job is to ensure land procurement, getting the land mutated and securing non-agricultural land clearances from state authorities. Hence, despite Covid-19, AGL expects to meet its targets.
When the entire country was under lockdown, the company was quick to start working on its planned processes which were formulated in the months of February and March. Hence, AGL’s capital commitment actually increased during the pandemic than what it would have been under normal circumstances. While the company believes that construction works would be impacted and there would be supply chain issues, it should block the contractors to get the supply when the impact of Covid is reduced.
Hence, AGL does not expect any issues pertaining to the supply of booster compressors, steel pipelines, online compressors and meters, barring some issues regarding imported equipment arriving from China. Besides, the company is also procuring domestically produced equipment so as to contribute to the Make in India programme of the central government. Overall, it does not expect grave challenges from supply chain point of view, however there might be some logistics issues.
The company is also focusing to complete its steel pipeline project. It has intensified the process of laying of steel pipelines and also expedited setting up of CNG stations. Thus, the company’s focus for the current fiscal year would be to complete all City Gas Stations, satellite LNG plants, lay maximum no. of steel pipelines and increase the no. of CNG stations.
Nevertheless, there are challenges with respect to labour migration and establishing working standards while ensuring adherence to social distancing norms, resulting in reduced productivity.
Q4. Would AGL be changing its sources of procuring equipment?
AGL is not looking for changing its equipment procurement sources. Largely, the companies providing equipment are expected to remain same. While, the company has placed pilot orders with some new agencies, not much of a change in source of supplies is expected as AGL has scheduled delivery of supplies.
Q5. Are municipal corporations able to provide all permissions online? Are there any delays in obtaining permissions physically due to Covid?
A no. of measures have been taken at AGL’s corporate house, as people’s safety is of paramount importance. These include checking temperatures of all the employees twice a day, mandating work from home for the vulnerable age group for the next 6 months, prescribing rotational shifts for the remaining staff, and ensuring cleanliness of all common areas in every 20 minutes, among others. These measures are being taken at not only the corporate office but in all GA offices as well.
With regard to permission delays, AGL has not faced any delays in grant of permissions from the municipal corporations. However, the additional obligations due to Covid continue to affect the pace of procedures.
All the municipal bodies and state regulatory authorities are rather looking for ways to bring the economy back on track. The CGD sector has a lot of potential and the state governments are currently only being held back from granting permissions due to Covid constraints since they are not able to function at the same level. Adani has also asked the relevant regulating authorities for a force majeure relaxation and grant of extensions on the minimum work programme and exclusivity. The intense lockdowns have adversely affected the construction activities.
Even after the pandemic is bought under control, its repercussions would be felt consequentially for a certain period of time. Hence, the regulatory authorities are not intentionally delaying granting of permissions but are rather unable to do so due to the ongoing pandemic situation. However, AGL is working to ensure that permissions do not become a major concern.
Q6. Is the end of market exclusivity a threat or an opportunity?
From an open access point of view, market exclusivity is an integral part of authorisation. There is a need to see how the regulator calibrates the same and how it is implemented so that along with consumer interest, entity interest is also taken into consideration. In the bidded GAs, the tariff is quoted and is applied once open access is granted, however, the regulatory body has to determine the tariff mechanism for an existing GA.
AGL sees market exclusivity as an opportunity, as currently it is restricted to a particular GA. With open access, it can tap other GAs as well.
Q7. What is the future outlook for the CGD sector?
The CGD sector is experiencing its best time, leaving aside the pandemic. The outlook for the next few years is positive, primarily on the back of increased government focus. It has been evident from the success of ninth and tenth rounds of bidding. Further, the 11th round of bidding is in the planning stage. The government is completely focused on every household having a PNG connection, a large number of fleet operating on CNG and providing connectivity for CNG stations. In line with the Government’s policy we are committed to contribute to the nation’s vision of providing a safer, cleaner and greener energy. As India’s economy slowly revitalizes, Adani Gas will put its best to overcome challenges posed by the global pandemic as a nation. In today’s world, climate adaptation cannot be considered independent of economic development priorities and both, job creation as well as decarbonization must be simultaneous objectives. India is poised to compete with the rest of the world in augmenting our energy mix and reducing our dependency on polluting fuels.