“In the current financial year, IOAGPL plans to invest at least Rs 450 crores in developing CGD infrastructure”: Rajiv Sikka, Chief Executive Officer, Indian Oil-Adani Gas Private Limited (IOAGPL)

In view of the outbreak of Covid-19 pandemic and subsequent lockdowns to stem its spread, the Petroleum and Natural Gas Regulatory Board (PNGRB) had provided extensions in minimum work programme (MWP) completion timelines to the city gas distribution (CGD) players. However, there is an ongoing debate about the adequacy of the relief provided by the regulator as the pandemic continues to impact the project implementation by the companies. The activity in the sector, which had declined by almost 90 per cent in the first quarter of the current fiscal, is slowly catching up. In an exclusive interview with CGDIndia, Rajiv Sikka, Chief Executive Officer, IOAGPL shares his perspective on the current CGD network, impact of Covid-19, issues faced and way forward for the CGD sector.

What is the current status of network development in the geographical areas (GAs) that have been authorised to IOAGPL under various CGD rounds?

The joint venture (JV) has been authorised 19 GAs, of which eight have been already commissioned (Chandigarh, Allahabad, Panipat, Daman, Udhamsingh Nagar, Ernakulam, Dharwad, and Bulandshahr). Further, two GAs are scheduled for commissioning in the coming months, while work is progressing on the remaining GAs which were primarily allocated in the latest 9th and 10th bidding rounds. Further, the JV has commissioned more than 70 compressed natural gas (CNG) stations and 60,000 domestic connections. Besides, it has laid more than 2,200 of steel and MDPE pipelines.

What is the current source of gas supply of IOAGPL? What is the mix of domestic gas and regasified liquefied natural gas (R-LNG)?

IOAGPL sources the administered pricing mechanism (APM) and non-APM gas from the government bodies only. Besides, the current mix of domestic gas and R-LNG stands at 60:40.

What were the capex plans of the company for the current year?

In the financial year 2019-20, the JV had incurred capital expenditure of about Rs 300 crores. Its capex plans for the current year (2020-21) is about Rs 450 crores.

What has been the impact of the pandemic on project implementation, fund availability and supply chains?

The outbreak of Covid-19 impacted the supply chain on both CNG as well as piped natural gas (PNG) fronts due to disrupted supply of equipment to the contractors. As a result, the works were completely disrupted in the first four months of the current fiscal year i.e. April-July. The pandemic impacted all the segments of the industry, though with varying degrees. While works have started to pick up post August 2020, there is still reluctance from the contractors in some areas.

What are the issues and challenges being faced by the industry? What are the specific steps being undertaken to deal with these issues?

The pandemic has increased the penetration of technology in a number of sectors. However, CGD sector is yet to witness a structural change in terms of thought process in the pre and post Covid periods. The supply of equipment typically takes 4-6 months, pointing out on the need for suppliers to become nimbler. As an entity, IOAGPL has planned to incorporate more technology in its operations for easier billing and payment options.

What are your expectations from the government? What are the issues that the industry faces that still are not addressed by PNGRB?

Like other CGD entities, IOAGPL had filed for extension in MWP period under the force majeure clause. However, the relief provided by the PNGRB has been insufficient as the impact of the pandemic is substantial and is not limited to initial four months’ period. Although the regulator has taken a number of steps in the last couple of years for facilitating the growth of the sector, however, more no. of steps needs to be taken in terms of intensifying engagement with the state governments. The ease of permissions and approvals, along with consistency in regulations across states are the fronts which need to be worked upon.

What are the company’s future network expansion plans?

IOAGPL has planned to deepen its relationship with the customers by opening more retail outlets. With regard to PNG connections, the company aims to fulfill its MWP aspirations in the scheduled time frame.

What is the short term and medium term outlook for the CGD sector?

Since the last two-three years, the CGD sector has witnessed significant growth, along with the help of private players such as Maruti and Mahindra. The next six months are going to be crucial for the company depending upon the persistence of the pandemic. There is a need to introduce loyalty cards for the consumers to help the consumers in both PNG and CNG, as well as providing easier billing options. Besides, PNGRB has already covered most of the areas where gas can be made easily available in the previous rounds. Therefore, the upcoming rounds will mostly include difficult geographical terrains and areas. As a result, PNGRB needs to become more liberal in seeking MWP commitments for success of the upcoming 11^th bidding round.