India's biggest city gas licensing auction to attract Rs 70,000 crore in investments

New Delhi: Government on Tuesday opened for bidding the biggest city gas distribution licensing round, offering 86 permits for selling CNG and piped cooking gas in 174 districts in 22 states and union territories. As many as 86 geographical areas (GAs), made by clubbing adjacent districts, are on offer in the 9th city gas distribution (CGD) bidding round, according to oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB). The GAs cover 24 percent of the country’s area and 29 percent of its population, Oil Minister Dharmendra Pradhan said at a roadshow organised here to promote the round. The round is likely to attract an investment of Rs 70,000 crore, a PNGRB presentation made at the roadshow said. The last day for bidding is 10 July. Pradhan said the government is targeting to raise share of natural gas in the primary energy basket to 15 percent from current 6 percent, in next few years. [caption id=“attachment_1506285” align=“alignleft” width=“380”] Representational Image. AFP.[/caption] The bid round is also aimed at meeting Prime Minister Narendra Modi’s target of giving piped cooking gas connection to 1 crore households, roughly triple the current size, by 2020. CGD licences for Bhopal in Madhya Pradesh, Ahmednagar in Maharashtra, Ludhiana and Jalandhar in Punjab, Barmer, Alwar and Kota in Rajasthan, Coimbatore and Salem in Tamil Nadu, Allahabad, Faizabad, Amethi and Rai Bareli in Uttar Pradesh, Dehradun in Uttarakhand and Burdwan in West Bengal are on offer. Prior to the 9th round, 91 GAs were awarded to firms like Indraprastha Gas Ltd and GAIL Gas Ltd, which are serving 240 million population, 42 lakh domestic consumers and 31 lakh CNG vehicles. Of these, 56 GAs were awarded through bidding rounds and the rest on government nomination. The bid round is being held on changed parameters after ‘one paisa’ bids spoilt the initial auction rounds. Bidders have been asked to quote the number of CNG stations to be set up and number of domestic cooking gas connections to be given in the first eight years of operation. In the previous eight bid rounds, bidders were asked to quote only the tariff for the pipeline that carries gas within the city limits. These bidding criteria did not include the rate at which an entity would sell CNG to automobiles or piped natural gas to households using the same pipeline network, leading to companies offering one paisa as the tariff to win licences. In the new guidelines, maximum weightage of 50 percent has been given to the number of piped gas connections proposed in eight years from the date of authorisation, as compared to 30 percent earlier. The number of CNG dispensing stations proposed to be set up has been assigned 20 percent weightage. Length of the pipeline to be laid in the GA and the tariff proposed for city gas and Compressed Natural Gas (CNG) have been assigned 10 percent weightage each. Also, a floor tariff of Rs 30 for city gas and Rs 2 per kg for CNG has been put in order to deter bidders from quoting unviable tariff of 1 paisa per unit. Companies having a net worth of not less than Rs 150 crore can bid for cities with a population of 50 lakh and more while the same for cities with population of 20 lakh to 50 lakh has been proposed at Rs 100 crore. The net worth eligibility goes down with population, with a Rs 5 crore net worth firm being eligible to bid for cities that have less than 10 lakh population. PNGRB said any entity security CGD licence would have to enter into a firm natural gas supply agreement with a natural gas producer or marketer in a transparent manner on the principle of ‘at an arm’s length’ within 180 days of winning a licence. The authorised entity has to achieve financial closure within 270 days from date of grant of licence. The winning company would have 8 years of marketing exclusivity in the given city. Current licences provide for 5 years of exclusivity. Last few rounds of CGD have evoked a lukewarm response. The fourth round was altogether cancelled, while the fifth saw a sparse response. The sixth round of bidding for 34 cities in 2015 got bids for only 20. The seventh round of bidding done to set up CGD infrastructure in 11 smart cities under smart city mission received only 1 bid. Seven cities were offered in the 8th round last year but not all cities have been awarded so far.