VMC, Adanis differ on gas sale

VMC move to sell CNG, PNG contradicts govt's 'one player in city' norm

With the cash-strapped Vadodara Municipal Corporation (VMC) deciding to go ahead with the distribution of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in Vadodara, it has locked horns with the Rs 5000-crore Adani group, which has been awarded the rights to distribute CNG and PNG in Vadodara and Ahmedabad.

The Corporation's decision to sell the gas in Vadodara, in fact, contradicts the decision taken by the state government to not to allow more than one player in a city in the gas distribution business.

The Adani group had shown interest to acquire the gas distribution wing of VMC and has since that the Gujarat Adani Energy Ltd (GAEL) is ready to pay the civic body to acquire the gas distribution system. But the VMC has been successful in thwarting all attempts made by Adanis to acquire its gas cell.

However, in a recent development, the civic body has adopted a resolution to allow GAEL to sell PNG in the areas where VMC does not have its network.

Encouraged by the this development, GAEL is now planning to kick off its PNG sales in selected areas of Vadodara from next month.

The company officials maintained that the attempts to acquire the gas distribution cell of VMC are still on.

"Since our earlier proposal to acquire the stake evoked no positive response from VMC and with the state government yet to take a firm decision on the issues, we proposed to VMC to allow us to distribute PNG in the areas where it does not have any network. The civic bodies has agreed to this proposal," Sanjay Gupta, chief executive officer of Adani Group told Business Standard.

"Still we will continue with our plan to acquire the cell as we understand that two players operating in one city in Gujarat will not be economically viable. GAEL is ready to pay the price for acquiring VMC's network," he added.

At present, VMC has 67,000 domestic consumers for PNG and 2,700 commercial consumers in the city. That leaves little space for the second player like Adani group, market observers believe. The gas cell of the Corporation reported a sales turnover of around Rs 18 crore at the end of the last fiscal year.

The stand-off between the Civic body is also expected to delay the GAEL's project to put in place a proper distribution network in Vadodara.

GAEL, however, faces no such opposition in Ahmedabad, where the company has got the right to distribute CNG and PNG. The company is also exploring opportunities for selling gas in various western Indian cities and towns and also in northern India.

"We are conducting feasibility studies for such opportunities in various states. But a concrete decision will be taken only after the Centre clarifies the role of state governments and central government in the oil and gas industry. Till these issues are sorted out, we have decided to concentrate on Gujarat," said Gupta.