Looking to push up the conversion rate from liquefied petroleum gas (LPG) to piped natural gas (PNP) by domestic consumers, some of the natural gas distribution companies like Indraprastha Gas Limited (IGL) and Haryana City Gas Distribution Ltd (HCGDL) are considering waiving off the deposit amount of Rs 5,000 on every connection and replacing it with a rental of Rs 25-50 per month.
While Haryana City Gas has yet to thoroughly study the financial implication of such a move, E S Ranganathan, managing director of IGL, told DNA Money that the gas company is likely to do away with the upfront deposit on every PNG connection in the Delhi-National Capital Region (NCR) soon. He said the plan has to be approved by his finance department and the Petroleum and Natural Gas Regulatory Board (PNGRB). It will not require the petroleum ministry’s nod.
The IGL chief has even worked out the math of such a move. “What we are thinking is, suppose we charge as rent of Rs 25-50 a month, we can waive the Rs 5,000 paid upfront for each connection. This is anyway the customer’s money, which is returned when his service is disconnected,” he said. Ranganathan said currently IGL earns an interest of 6% on Rs 5,000 per year, which comes to Rs 300. He said this annual Rs 300 income per customer from the deposit could translate into a rent of Rs 25 per month.
According to him, this will make it easier for new users to start using PNG, for which IGL has already laid the pipeline in areas under its jurisdiction. For instance, IGL, which has over 0.676 million customers in Delhi-NCR, has already spent aggressively on infrastructure to supply natural gas to domestic users, but in many areas, people were still not voluntarily shifting to PNG.
Close to 0.25 million residents in these areas are still to make the switch; “there is a pipe reaching right till their homes, but since they have not opted for it, we have not connected it to their house”.
Ranganathan feels one of the reasons for people not going in for the PNG connection was the upfront deposit. Initially, he tried to come around this problem by providing easier payment option of equated monthly installment (EMI) to customers but failed to make much dent with it. “When we went for EMI scheme of three installments of around Rs 1,500. People never accepted it. Now, we have introduced an EMI of Rs 500 per bill. This, too, is not working. It’s a human tendency. For instance, if you are paying Rs 800 per month and after shifting (to PNG), I suddenly give you Rs 700 bill for gas plus Rs 500 EMI, you will think I was spending Rs 800 and now I am spending Rs 1,200 per month and think it is expensive,” said IGL head.
Rahul Chopra, CEO of HCGDL that distributes PNG in Gurugram, said his company will also evaluate the option and take a decision. He believes the monthly rental option was a more workable solution than deposit model to increase the use of PNG. “I think it is workable and will help increase the conversion rate (from LPG to PNG)”. Citing an example, he said that Haryana Gas had laid pipelines in front of many apartments in Gurugram, where conversion rate was barely 30-40%. “One of the reasons for this was high deposits. Also, many people do not opt for PNG because they are tenants. If there is monthly rent, then they can just take the connection and pay rent for it,” he said.
Today, Haryana City Gas has 13 compressed natural gas (CNG) stations and 15,000 PNG domestic connections in Gurugram. Chopra said his company was targeting PNG connections of up to 0.1 million in the next few years. “Gurugram has a population of around 0.4-0.5 million and a 20%-30% penetration would help us break-even faster”. Mahanagar Gas Ltd (MGL), Gujarat Gas Company Ltd (GGCL) and others also take an upfront deposit for PNG connection and have not removed it yet. Clinton Portis Authentic JerseyShare This