To get priority over petrochemical and power projects in gas supply.
The government has promoted the city gas distribution (CGD) project, for which the first round of authorisation is underway, to the second spot in its priority list for gas utlilisation. The first spot is held by the fertiliser sector.
The empowered group of ministers (EGoM) has decided to allocate 5 million metric standard cubic metre (mmscmd) gas to the project, to be supplied from Reliance Industries’ KG-D6 field.
However, the use of the allocated gas has been restricted to the domestic consumers and CNG pumps. The CGD player cannot sell this gas to industrial units, according to sources. The Petroleum and Natural Gas Regulatory Board (PNGRB) has requested the EGoM to review this clause. Prior to this, CGD figured fourth in the country’s gas utilisation policy, after fertiliser, petrochemical and power projects.
“The upgradation in priority list means the government seems to have realised the positive economic impact of city gas across the economy and the environment too. This also provides an incentive to the potential bidders who will have an assured supply to certain extent,” said Rakesh Jain, General Manager (Energy Division), Feedback Ventures.
However, the gas is expected to be remain surplus for the new CGD entities if the use of the allocated quantity is limited to domestic PNG and CNG use, he added.
As consumers of LPG cylinders shift to piped natural gas, the government’s subsidy burden on the LPG front is expected to come down. Moreover, the vehicles that use diesel/petrol will also shift to CNG, with the subsidy element on them also expected to come down. But there should be a mechanism to ensure that the gas supplied to domestic units is not diverted for commercial use as has been found in case of domestic LPG cylinders, said Jain.
The grant of authorisation for CGD in six cities is likely to happen on March 31. Eight companies, including Reliance Industries, GAIL, Cairn and Indian Oil Corporation, have bid for six towns for supplying CNG to automobiles and piped natural gas to households for cooking purpose. The PNGRB has invited bids for seven more cities. Gradually, the CGD network would cover most of the cities in the country.
“A decision has been taken to supply the first 40 mmscmd per day of gas to meet the shortfall in existing gas-based urea plants, LPG plants and power plants,” Petroleum Minister Murli Deora said on February 18.
The KG basin is expected to begin production in April. According to the EGoM, production at the KG-D6 field is expected to reach a plateau of around 80 mmscmd by 2012.
