The government looks to overhaul its city gas distribution policy to clear major hurdles holding back expansion of piped cooking gas in the country.
The government has started work on reviewing rules, which companies say need to be changed to encourage them to take up gas distribution in cities and set up gas stations on highways without time-consuming procedures and unnecessary costs.
The government aims to treble its domestic piped gas consumer base to one crore by 2019, a target set by Prime Minister Narendra Modi who presided over a deeper penetration of piped gas in Gujarat during his term as chief minister of the state.
But at the current pace — the country added barely 3 lakh new domestic piped gas consumers in 2015-16 — the target is unlikely to be met, oil ministry officials said. At the beginning of the current fiscal year, the number of domestic piped gas consumers stood at 31.6 lakh.
This has driven the oil ministry to set up two committees, with members from small and big city gas companies and Petroleum and Natural Gas Regulatory Board (PNGRB), the downstream regulator.
One committee will look at making the bidding process more effective by suggesting a replacement of the current process where fewer cities attract bid in auctions and all bids offer the same tariff, the key competing criterion.
The other panel will suggest ways to deal with key obstacles city gas companies face such as high restoration charges levied by local authorities, and delays in obtaining permissions.
The panels are to submit their reports by the end of this month, following which the oil ministry will initiate changes.
“The current bidding parameters are not working well. So the panel will look at other possible parameters,” said an oil ministry official.
In the sixth round of city gas distribution auction at the beginning of 2016, 14 of the total 34 geographical areas, or districts, received no bid while six attracted just one bid each. Similarly, last year, of the 20 districts, eight got no bid and two got just a single bid each.
A scan of some bids in previous auctions shows all gas companies offered Rs 0.01 per unit as network tariff bid and also as charges for compressing natural gas, the two key price bid criteria, forcing the regulator to pick winners on the basis of the bid bond value.
Bidders submit a bank guarantee that’s forfeited if the winner does not take on the job in time.
Some gas companies have suggested switching to viability gap funding model with the company seeking the lowest support getting the contract.
Besides this, another key impediment is the way areas are defined for auction: A geographically large district with mainly rural population makes a project less attractive.
Some gas companies consider the minimum targets on laying pipelines and connecting households also challenging. Missing targets result in companies losing their bank guarantees.
The government is also separately figuring out a framework to allow gas pumps on highways that can make it easier for gas-run vehicles to go to other cities. Nick Perry Womens JerseyShare This