Bhagyanagar gears up for tariff order

Bhagyanagar Gas Limited (BGL), which is developing CNG and city gas distribution network for Hyderabad and Vijayawada, is expecting tariff order from the Petroleum and Natural Gas Regulatory Board (PNGRB) soon.

“We expect the tariff order to come shortly as the PNGRB had kickstarted the process of fixing tariff for city gas and CNG with Delhi’s Indraprastha Gas yesterday,” a senior official of BGL told Business Standard.

BGL is a joint venture between Hindustan Petroleum Corporation Limited (HPCL) and GAIL India Limited. Andhra Pradesh Industrial Infrastructure Corporation (APIIC) also holds 5 per cent equity in the company for it has provided land to develop the infrastructure.

Set up in the year 2003, BGL first commenced CNG distribution operations on a small scale in 2005 from Vijayawada and later expanded the same to Hyderabad.

The regulator has to fix the tariff as the company had got permission for supply and distribution of CNG and piped gas for both the cities before the PNGRB was constituted. In the case of Kakinada, the company won the city gas distribution project, where the tariff was decided at the time of awarding it.

The company is receiving about 0.045 mmscmd of natural gas from Reliance Industries Limited (RIL), and this is mostly used for CNG requirements of road transport corporation buses and other private vehicles. It recently launched piped gas distribution on a pilot scale to a colony in Hyderabad.

The company estimates a potential demand for 1 mmscmd of natural gas to meet the CNG needs of vehicles and buses in Hyderabad apart from 0.125 mmscmd for domestic gas in the initial phase.

On the possibility of any sharp cut in the rates proposed by BGL, the official, who did not want to be named, said he did not expect such a thing as what they had asked for or currently were being charged was very reasonable compared with that of Indraprastha. The company had submitted its proposals to PNGRB almost one-and-a-half years ago followed by several rounds of negotiations with the regulator, according to the official.

BGL had drawn up the CNG and piped gas distribution network project at an estimated cost of Rs 4,000 crore covering Hyderabad, Vijayawada and Kakinada cities. Of this, close to 90 per cent of the investment is expected to be required for developing the network in the state capital. However, the financial closure for the project is still pending. In addition to the tariff order, the regulator also prescribes a 5-year time line to complete the entire project.

“We hope to conclude the financial closure in the next four months. Discussions with bankers are on,” said the official. Though there was a proposal to rope in private players into the project, a final decision had not been yet taken, sources said. The company is in the process of finalising the contracts for laying the gas distribution network in Hyderabad.

BGL was also planning to bid for city gas distribution projects for districts of Rangareddy, Medak, Khammam and Nalgonda. However, the regulator had cancelled the process ahead of its commencement as it wanted to take a re-look at the framework for awarding projects in the country.