The ongoing expansion plans for CNG and city gas distribution by Bhagyanagar Gas Limited have been hit with Reliance Industries Limited (RIL) refusing to allocate an additional 20,000 cubic metre natural gas by swapping RLNG (re-gasified liquefied natural gas) of the same quantity on the Western coast.
The ministry had directed a fraction of 2.594 million standard cubic metre per day (mmscmd) of K-G D6 gas allocated to state-owned GAIL India Ltd be diverted to the Hyderabad-based company under the current gas swapping guidelines.
Through swapping, GAIL would ensure natural supply to its existing customers by importing LNG to the extent it is diverted and charge Bhagyanagar Gas the actual price of imported LNG. This has to be facilitated by RIL as the company not only operates the K-G D6 block but also owns the gas trunk line that carries natural gas from there to Gujarat on the Western coast. “We had planned to add 10 more CNG stations besides providing domestic gas to about 10,000 customers by sourcing an additional 20,000 cubic metre gas from KG D6,” said a senior official of BGL, a joint venture between public sector GAIL and HPCL. The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) also holds 5 per cent stake in the company towards infrastructure facilitation.
The petroleum ministry’s directive to facilitate additional quantum of natural gas in favour of Bhagyanagar Gas through RLNG swapping was turned down by RIL last week. The natural gas producer said this kind of an arrangement had led to trading of the scarce commodity in violation of the present norms that mandate natural gas allocation to priority sectors including fertiliser and power.
“We have reservations with the way RIL has been trying to interpret our request. There is no trading involved in swapping of RLNG and we are only trying to cover more customers by enhancing the CNG and city gas supply as there is a demand,” the official told Business Standard. Bhagyanagar Gas’ parent companies have again approached the petroleum ministry to impress upon RIL to review its stand on RLNG swapping, according to the official. The additional quantity sought by BGL is just a small fraction as 1 mmscmd translates into 1 million cubic metre natural gas. However, the message it sends out has serious implications on the network expansion plans. It had drawn up plans to develop city gas and CNG network at an investment of Rs 4,000 crore and has been in the process of achieving financial closure this year itself.
“How would banks fund our project if they think their loans are going to become non-performing assets in the light of this development,” the official said.
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Bhagyanagar Gas , which handles a supply of around 100,000 cubic metre, operates 20-plus CNG stations in Hyderabad, Vijayawada and Kakinada and recently started city gas distribution to around 1,000 domestic households.
The company receives about 0.045 mmscmd of natural gas from RIL through administrative price mechanism. This is mostly used for CNG requirements of road transport corporation buses and other private vehicles.
There is a potential demand for 1 mmscmd of natural gas for CNG apart from 0.125 mmscmd for domestic gas in the initial phase, according to the company estimate.