The city gas distribution (CGD) sector is expected to grow exponentially in the next few years, with the government setting a target of increasing the share of natural gas in the country’s energy basket from the current level of 6.2 per cent to 15 per cent by 2030. The Covid-19 pandemic derailed the growth of the CGD sector as natural gas consumption declined sharply, however, major CGD entities are confident about the sector’s strong bounce back. Indraprastha Gas Limited (IGL) is one of the key players in the CGD segment and has been playing a vital role in the segment’s exponential growth in the past few years.
In an exclusive interview with CGDIndia, A.K. Jana, Managing Director, IGL spoke extensively about the company’s existing operations, impact of Covid-19, network expansion and capex plans, key challenges faced by the company and the future outlook…
How have IGL’s volumes and operations been impacted by the Covid-19 pandemic?
The volumes were adversely affected during the initial months of the nationwide lockdown. During the first quarter of financial year (FY) 2020-21 the volumes were down to 20 per cent, however, in the third quarter of FY21 the volumes reached 97-98 per cent of the pre-Covid levels. Further, the volumes are expected to improve greatly in the coming months.
With regard to operations, IGL’s domestic piped natural gas (PNG) segment witnessed immense growth despite the pandemic. The volumes in the domestic segment recorded a growth of 20-25 per cent from pre-covid levels till the third quarter of FY21. In the industrial segment, the company has recorded a modest growth and is operating at a level of 105 per cent as compared to pre-covid levels. The compressed natural gas (CNG) volumes have also been affected adversely as the transport sector is still operating in a restricted manner.
How is IGL’s network expected to expand over the next one year and what are the capex plans?
The pandemic led to various constraints related to construction activities due to unavailability of migrant labour and delays in procuring material and equipment. However, despite the various issues the company successfully established around 200,000 domestic PNG connections till the third quarter of FY21. Further, all industrial units in Delhi were connected to PNG in February 2021. As far as targets for CNG stations are concerned, earlier the company used to establish around 50 stations every year. In FY21 the company is expected to establish 80 stations and from FY22 onwards the company will be looking to commission around 100 stations per year. On the investment front, the company is expected to have a capex plan of Rs 12-15 billion annually.
How does IGL perceive Petroleum and Natural Gas Regulatory Board’s open access norms?
The Petroleum and Natural Gas Regulatory Board has been working on the open access norms for a long time and while developing the framework of the regulation, the board took the feedback of CGD entities to ensure efficient implementation. Hence, IGL does not foresee any major issues arising from the implementation of these norms. Further, the company perceives the open access regulation as a win-win situation for both the regulatory body and the CGD entities as it will enable companies to explore different regions of the country and expand their network.
Has IGL faced any major issues with contractors?
The company has not faced any major issues with the contractors.During the initial months of the nationwide lockdown owing to the Covid-19 pandemic, some issues were faced in construction activities. Due to disruption in the supply chain the contractors were unable to obtain requisite material, however, with gradual ease in restrictions the procurement issues were addressed to a great extent.
What are the key issues and challenges that the CGD segment faces and what is the future outlook for the sector?
The major challenge that the sector is facing currently is the sharp decline in demand due to which the operations of various CGD entities have derailed. However, the reduction in demand is expected to be short-lived and the sector is expected to be back on track from FY22 onwards. Manufacturing in the country is also an area of concern for the CGD sector. IGL is planning to establish around 600,000 PNG connections in FY22 and obtaining meters for these connections will be a challenging task as manufacturing of meters in the country is currently not at the level to cater such a huge demand.
Going forward, IGL’s perception towards the CGD segment remains highly positive as the company is expected to witness double digit growth in the coming years and has laid out a strong capex plan for network expansion in the medium and long term.