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Challenges Faced by City Gas Distribution Sector and the Way Ahead

21-June-2019  

Challenges Faced by City Gas Distribution Sector and the Way Ahead

 



The Federation of Indian Petroleum Industry (FIPI) in collaboration with ICF organised a roundtable discussion on ‘Challenges Faced by City Gas Distribution Sector and the Way Ahead’ on 21 June, 2019 at India Habitat Centre (IHC), New Delhi. The objective of the roundtable was to engage with the CGD entities and explore the roadblocks and challenges faced by these companies in expanding the CGD networks in their respective Geographical Areas (GAs).



The welcome address at the Roundtable was delivered by Dr R K Malhotra, Director General, FIPI. In his address Dr Malhotra underlined the importance an increased contribution of natural gas in India’s primary energy mix in tackling the health issues arising from falling air quality in across major cities in the country and in fulfilling India’s CoP-21, Paris climate change commitments. Further, he emphasised that CGD entities will have a major role in achieving the above mentioned objectives. After ten rounds of CGD bidding, over 70 per cent of the country’s population will now have access to natural gas. With such large scale expansion of CGD network across the country, CGD entities will be faced with various challenges arising due to shortage of vendors, financiers, lack of skilled manpower and non-alignment of priorities at the central and state levels. In this regard, the objective of the FIPI CGD Roundtable discussion is to provide a common platform for all CGD entities to voice their concerns and advocate for favourable targeted interventions by the Government.



Setting the context for the roundtable discussion, the ICF presentation mentioned that the CGD segment has received an unprecedented push from the Government over the last few years. After the tenth round of CGD bidding, over 70 per cent of the Indian population will have access to the cleaner fuel. Such large-scale expansion of the CGD network will be a big step forward towards achieving the Government’s ambitious objective of increasing the penetration of natural gas in the primary energy mix from a present 6 per cent to 15 per cent by 2030. Over the next few years, the Government has envisaged providing 2 crore new PNG connections and setting up over 10,000 CNG stations. However, to keep pace with these targets, the country will require an overall development of the ancillary and support industry and an uninterrupted flow of skilled manpower. The other challenges bottlenecking the development of the CGD development are multiple clearance involved; lack of public awareness about benefits of natural gas; land availability and absence of qualified vendors amongst others.



During the course of the open discussion, participants highlighted their concerns over lack of certified suppliers for key equipment in the country. Due to the sudden surge in demand, the present suppliers are booked well above their capacity. Further, some participants voiced their concerns regarding gas swapping and financial closure of the projects. Participants reported that most states in the country do not have the necessary framework for CGD network. Further, due to non-sensitization of local authorities with the benefits of natural gas and due to the difference in priorities of the State and Central Governments, many CGD projects are getting delayed due to prolonged periods spent in getting clearances. Most participants felt a pressing need for clarity from the PNGRB on the status of pipelines being laid and expected dates for the start of gas supply. There was a general consensus amongst the participants that to promote CGD networks, natural gas must be brought under GST with immediate effect and other GST related issues of the segment should also be looked into by the Government.



Many participants were of the opinion that PNGRB needs to support public awareness campaigns to sensitize the local population with the benefits of natural gas over conventional fuel and engage with the State Governments and local authorities to explore the issues bottlenecking the development of CGD networks. PNGRB should also look into developing quality standards for the vendors and safety standards. The industry also needs to sensitize the hydrocarbon Sector Skill Council (HSSC) for developing skilled manpower to support the sector. It was realized by all participants that the industry needs to engage with both MoPNG and PNGRB to advocate for favourable policies and sharing of international best practices.



Over the course of the discussion the participants agreed that there is a strong need for a common forum for all CGD companies to collaborate and voice the industry concerns with the Government and the regulators. In this regard, there was a common consent that FIPI, owing to its wide industry expertise, is best placed to provide such a platform.



The vote of thanks and closing remark at the session was provided by Mr Gurpreet Chugh, Managing Director, ICF. Mr Chugh summarised the major takeaways from the session and informed the industry participants that the findings of the final report developed by FIPI and ICF, based on such industry deliberations, will be advocated with the Ministry and all relevant authorities.