The city gas distribution (CGD) sector is on its way to become the new demand hub for gas in India. Its market share is expected to increase manifold in the coming years, primarily on the back of favourable policies. In an interview with CGDIndia, A.K. Jana, Managing Director, Indraprastha Gas Limited (IGL), spoke about the current status of CGD networks operated by IGL, impact of Covid-19 on its operations, 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 IGL Group with respect to CNG stations, PNG consumers, etc.?
IGL is currently supplying gas in 10 geographical areas of NCT of Delhi and NCR region. The company operates 550 compressed natural gas (CNG) stations catering to 3 million vehicles and provides services to 1.6 million households. IGL primarily deals in two sectors, CNG and piped natural gas (PNG), with the latter comprising of industrial, commercial and domestic connections.
The Covid-19 pandemic has drastically affected the operations of the company. The volume of gas supplied by IGL declined from 6.4 mmscmd in April 2019 to around 1.2 mmscmd in April 2020. However, with the gradual opening of the economy, the gas volume supplied increased to 5.5 mmscmd, 80 per cent of the pre-Covid level.
Q2. What targets has IGL set for 2020? Is the company likely to achieve these targets?
IGL has planned an investment of Rs 12-15 billion every year for the next five years. The company doesn’t intend on cutting down its capex targets of 2020-21, as mandated by the government. Further, IGL plans on servicing 0.3 million new connections and setting up 100 CNG stations during the current year itself.
IGL has provided 1,000 new connections so far in 2020. The construction work for setting up of the CNG stations was discontinued on account of the nationwide lockdown enforced to contain the spread of the pandemic. However, IGL is hopeful that with the easing of lockdown restrictions, the company will be able to meet its set targets.
Q3. What are some of the key issues and challenges faced by the CGD sector?
One of the key issues faced by the CGD companies is the poor availability of vendors for procuring equipment such as compressors and dispensers. Further, the market has very few skilled labourers which will not be able to service the anticipated growth in the CGD segment. Obtaining permissions from the local agencies is another major issue.
CGD sector has a great dependence on migrant labour which plays a vital role in the construction activities. The mass migration of labour force to their native places has posed significant challenges for the CGD companies. Further, bringing them back to the construction sites would be a difficult task.
Q4. Is IGL changing its sources of buying equipment and vendors?
IGL has formulated a policy under which they place pilot orders with new vendors. The company allocates 200-300 houses to the vendors and checks if they are able to work well. IGL has similar provisions for dispensers, compressors and meters as well. They are required to ensure that quality and safety of equipment. The company intends on increasing competition not by diluting the specifications but by the increasing the participation of multiple vendors.
IGL relies heavily on imports from China. However, the government has placed restrictions on Chinese imports, posing certain challenges. Meanwhile, the company is willing to provide assistance to Indian vendors through joint ventures so that they can enhance their capacity in not just one location but pan India.
Q5. Is end of market exclusivity a threat or opportunity?
IGL believes that exclusivity is part of the reforms and all reforms that are carried out in a proper manner are welcome. The reforms are carried out by the regulator who has the responsibility to ensure the consumer’s benefit while safeguarding the interests of the infrastructure developers as well.
IGL perceives no threat from market exclusivity. Meanwhile, the company is preparing for the changing scenario wherein more players are expected to enter the domestic gas sector.
Q6. What is the future outlook for the CGD sector?
The CGD sector has seen great magnitude of focus in the past few years. The growth of the sector currently stands at 16-17 per cent with a consumption of 30 mmscmd CNG gas. With the collective effort of all the stakeholders, the sector is expected to double its current share in the next four to five years.
Q7. How does IGL develop and support the ancillary industries for completion of bids?
IGL has a system for vendor development wherein the company provides technical support to the vendors for setting up dispensers, compressors and meters. The vendors must have a technical support requirement and should ensure quality of the equipment.
Q8. What is IGL’s focus area in the emerging new technologies?
IGL has faced major challenges in taking meter readings in metropolitans like Delhi and Mumbai. The company is therefore exploring the smart metering section to ease the task of metering.