KGGNL to begin work on city gas by Sept

The Krishna-Godavari Basin Gas Pipeline Network Limited (KGGNL) will begin implementing city gas distribution (CGD) network project in 23 cities and municipalities, including Kakinada, Rajahmundry and Visakhapatnam from August-September this year.

The Gujarat State Petroleum Corporation (GSPC), which has applied for city gas distribution in all the 23 cities and towns, will be the supplying agency, according to state government officials.

KGGNL is a special purpose vehicle (SPV) promoted by the Andhra Pradesh government to implement the natural gas pipeline project in the state in which the state-owned Infrastructure Corporation of Andhra Pradesh Limited (Incap) and GSPC hold 26 per cent equity each while the remaining 48 per cent is held by IDFC Private Equity.

The phase one project, including CGD and transmission line covering 23 cities and towns, is expected to cost about Rs 750 crore.

Of this, the debt component is Rs 375 crore and the equity component is Rs 187 crore, according to preliminary estimates prepared by the KGGNL. The total project cost involving the gas grid network covering the entire state has been worked out at Rs 4,900 crore.

However, KV Rao, principal secretary, department of infrastructure and investment, said the actual cost of the project could be determined only after working out a detailed CGD plan for each of these cities and towns.

"As per the mandate given by the state government, KGGNL will develop the CGD network for the 23 cities and municipalities on its own," he told Business Standard.

According to officials, the chief minister, at a meeting here on Monday, had asked the state finance department to release the balance Rs 38 crore towards the state government's equity of Rs 68 crore. He instructed the officials to complete the CGD network by July 2008.

GSPC is yet to receive clearances for CGD from the petroleum ministry. Following today's meeting, the government has decided to follow up the issue for early clearance for CGD, the officials said.

It may be recalled that Reliance Industries Limited (RIL) had also decided to implement CGD network on its own in 32 cities and towns in the state. Though the company had come forward to enter into a memorandum of understanding with the state government, it did not materialise as the government asked for supply of gas at a lower price for various sectors in the state.

The officials, however, said RIL was willing to supply city gas at Rs 175 per quantity equivalent to a standard 14 kg LPG cylinder.