India opens biggest CGD round, expects investments to the tune of Rs 800 bn

The government has launched its biggest city gas licensing round on Tuesday offering 86 geographical areas covering 174 districts, that may see an investment to the tune of around Rs 600-800 billion. 

"In each of these 86 areas on offer, covering 22 states, we see an approximate investment of Rs 7-10 billion in a span of eight years," Pradhan said addressing a roadshow by the Petroleum and Natural Gas Regulatory Board (PNGRB). According to industry estimates, through the current round of bidding, CGD volumes in India is likely to double from 25 million metric standard cubic meters per day (mmscmd) to 50 mmscmd in the next five years. 

The bidders will get permits to sell compressed natural gas (CNG) and piped cooking gas in the areas under offer. Pradhan added that through these measures, the government expects to raise the share of natural gas in India's energy mix from 6 per cent to 15 per cent.  Prior to this, only 91 geographical areas were covered in the previous eight rounds. 

The current round will be covering 29 per cent of India's population and 24 per cent of the country's geographical area. The last date of submission of bids is July 10. "By October this year, contracts for the areas will be awarded and by April 2019, gas distribution is likely to start," said D K Sarraf, chairman of PNGRB. 

The round is also aimed at achieving the Prime Minister's target of achieving piped cooking gas connection in 10 million houses by 2020. 

"The highlight of this round is that the winning company will get eight years of marketing exclusivity, which can even be extended to nine years based on certain criteria," said an official. This is compared to the five-year exclusivity at present. 

Previous rounds faced confusions after companies even going for one paisa bid as they were asked to quote tariff only. However, this time bidders will have to quote the number of CNG stations to be set up and household connections to be given 

The government has even set a floor tariff of Rs 30 per million metric British thermal unit (MMBTU) for city gas and Rs 2 per kilogram gor CNG.