Riding on green fuel: Star PSU Gujarat Gas looks to tap new markets

Having become India's largest city gas distribution company, Gujarat Gas looks to tap new markets

Gujarat Gas (GGL) — India’s largest city gas distribution (CGD) company — has struck a balance between being a profitable listed entity and fulfilling the social responsibility that goes with being a public sector undertaking (PSU). And, it has achieved this with aplomb.

In doing so, GGL has become India’s only CGD company to have connected more than 1,000 villages through its pipeline network.

At the same time, GGL posted 32.8 per cent year-on-year (YoY) growth in net sales in FY20, to Rs 10,300 crore, from Rs 7,754 crore in FY19, while profit after tax grew a whopping 187 per cent to Rs 1,199 crore, from Rs 418 crore in the year-ago period.  

GGL’s strong run continued even in the Covid-19 pandemic-stricken FY21, in which it had posted a 23 per cent YoY increase in volume by the third quarter of the financial year, with average gas sales at 11.44 million metric standard cubic metres per day (mmscmd), as against the average gas sales volume of 9.44 mmscmd in FY20.

Attributing this success to the foundation of Gujarat’s gas economy, laid by Prime Minister Narendra Modi when he was state chief minister, GGL Managing Director Sanjeev Kumar says, “Gujarat Gas is an outcome of that vision, now being carried forward by the current chief minister, with the able support of our chairman, Anil Mukim.”

GGL no doubt got a leg-up from judicial orders, but it has built on them by grabbing  business opportunities with both hands. For instance, a National Green Tribunal order in 2019 led to one of the country’s largest ceramic units, located at Morbi in Gujarat, switching from coal gasifiers to natural gas.

Coupled with the continued expansion of ceramic units at Morbi and associated areas such as Aniyari, driven by export-led growth, this has meant substantial volume growth for Gujarat Gas.

The state PSU has not only gained from Morbi, but also given back in terms of environmental sustainability. “After the conversion of all units from coal to gas, the air quality index improved dramatically, thereby raising the liveability index of the people of Morbi,” says Kumar.

Furthermore, GGL has been adding newer geographical areas (GAs) to its kitty by continually participating in the bidding rounds conducted by the Petroleum and Natural Gas Regulatory Board (PNGRB). GGL now has a presence across 42 districts and towns in Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Punjab, Haryana, and the Union Territory of Dadra & Nagar Haveli, and PNGRB authorisations for CGD development in 27 GAs.

The company’s piped natural gas (PNG) domestic connections now run to over 1.5 million, arguably the largest customer base in this segment in India, along with over 13,000 commercial and 3,900-plus industrial PNG connections. 

GGL has benefitted from being part of the Gujarat State Petroleum Corporation (GSPC) group, especially in sourcing liquefied natural gas (LNG) at the right prices, says Kumar: “Balancing our sourcing portfolio gives us the benefit of lower spot LNG prices, for ourselves and our customers. Availability of LNG in the right quantity at the right price is a key factor. Our other group companies, GSPL and GSPC, play a key role by immediately making LNG available.” 

GGL is poised to become one of the industry leaders, since the CGD market in India is projected to see a compound annual growth rate (CAGR) of 10 per cent and reach over 25,000 mmscm by 2030, from an estimated 9,000 mmscm in 2020.

The company is looking to add more than 100 new compressed natural gas (CNG) stations in FY21 and FY22 to the existing 500-plus stations. It is also pursuing other business avenues, such as LNG stations for heavy trucks: A set of dairy fleets in the state is being converted from CNG to LNG on a pilot basis.

Likewise, GGL is exploring ways to supply gas to Gujarat’s shipbreaking hub at Alang, where natural gas is seen as a sustainable alternative to liquefied petroleum gas being used right now.

Meanwhile, with expansion plans in PNG, CNG and other segments in place, GGL has planned annual investments of Rs 700-800 crore, which it will raise mainly through internal accruals.