City Gas DistributionSneha Santra

Maitraiyee Jain

City Gas DistributionCGD is commonly described as the final

component of the natural gas value chain.CGD is that segment of the chain which

makes natural gas available to customers for use as transport and cooking fuel besides commercial and industrial uses

Low pressure pipelinesWhile large consumers of natural gas such as

the power and fertilizer industry receive natural gas directly through the high pressure interstate transmission pipelines, CGD is provided through a network of medium to low pressure distribution pipelines by a local distribution company

Retail customersCGD involves supply of small volumes of gas

to a large number of retail customers. It comprises compressed natural gas networks that supply natural gas for automotive use through CNG dispensing stations and piped natural gas (PNG) network that provides natural gas as a fuel for city based commercial/industrial/domestic purposes

HistoryCGD in India began as early as 1880 when

the calcutta gas company limited began to undertake gas retail business. It depended on coal gas and still operating though incurring loses.

Since 1970 onwards CGD operations were undertaken by various players but these were limited to Delhi, mumbai, and several cities and towns in Gujarat.

Supreme courtThe big boost for CGD growth came in 1998

when the supreme court issued orders to convert all public transport vehicles plying in Delhi to CNG in response to a public interest litigation filed seeking a solution to the rising air pollution in Delhi.

CGD in many townsSince 1998 number of rulings had given

boost to the development of CGD in India. Other than major cities where the pollution and particulate matter levels are high and there is judicial and public pressure to control it most of the CGD growth has happened in areas which are close to existing transmission pipelines.

KG D-6 BlockSince the commencement of production of

natural gas from the Krishna-Godavari D 6 block the efforts and demands of various states have intensified.

Some of the cities however cannot get natural gas immediately, as the current transportation network is yet to reach many potential consumption centres.

The spread of CGD to other regions depends on the growth of the transportation network .

Spread of CGDThe spread of CGD has been determined by

available sources of natural gas, existence of transmission pipelines and in case of major cities by legal orders.

CGD in statesThe CGD has spread to the following states,DelhiMaharashtraGujaratAndhra PradeshTripuraUttar Pradesh

PNGRB

Since the PNGRB came in to existence in 2007, it had given a priority to CGD. It had notified CGD and pipeline regulations in 2008. It has issued CGD authorization for several towns in three rounds of bidding

PNGRB invites bids and issue authorization for city gas distribution.

Geographical areas (GA)The PNGRB has so far indentified about 335

GA’s to invite bids in the next 2-3 years.Of these 243 GA’s have been indentified by

the PNGRB on a suo moto basis while the others were finalized based on the EOI’s submitted by entities interested in the business.

IssueIGL had been implementing CGD in

Ghaziabad before the PNGRB came in to being.

After its inception the PNGRB rejected IGL contention that it was authorized by the supreme court and government to undertake CGD operations in Ghaziabad and it had invited bids from entities for undertaking operations in Ghaziabad.

Issue

Indraprastha Gas Ltd (IGL) and a non profit organization voice of India has challenged the PNGRB notification for bid in Ghaziabad in Delhi High court stating section 16 has not so far notified by the Government, so PNGRB has no authorization to issue licenses for city gas distribution network.

DELHI HIGH COURTIn pursuance of the challenge by

Indraprastha Gas Ltd (IGL) the Delhi high court ruled on January 10, 2010 that the petroleum and natural gas regulatory board did not has power to issue city gas licenses

The High court ruled since the government had not notified section 16 of the PNGRB act, the downstream regulator did not have powers to grant authorization for beginning city gas distribution

The board was constituted in 2007 without section 16 of the act being notified.

DELHI HIGH COURTThe High Court judgment says “ In view of

non notification it is held that the board has no power to grant authorization to entities which applied to it for laying, building, operating or expanding city or local natural gas distribution networks….this is in consonance with the central government’s stand in the counter affidavit filed before the court”

DELHI HIGH COURTThe Delhi high court has held “ Any

authorization given by the board cannot be termed as a valid authorization as section 16 of the PNGRB act has not yet been notified by the government”

SUPREME COURTAgainst the order of the Delhi high court,

PNGRB preferred an special leave petition in the supreme court of India

The supreme court stated the PNGRB board can only process pending applications, but it cannot process any final orders.

GOI notified section 16In July 2010 the Union government notified

section 16 of the PNGRB act 2006, to allow the board to process CGD applications.

Supreme courtIn may 2011 the supreme court empowered

the PNGRB to issue CGD licenses.

Clarity in policyContinuous supply of gas requires clarity in

policy, legal and regulatory reforms besides rapid development of important infrastructure.

Investment opportunitiesThe Indian gas market has significant

potential but is expected to face supply constraints in the foreseeable future. The increasing demand supply gap presents a major opportunity in foreign Investment in the sector.

These factors can open up several opportunities for partnerships and collaborations between the gas exporting countries and India, given their need for steady revenue and India’s requirements for LNG supply, storage, pipelines, city gas distribution as well as power plants.

Areas to investThese are the investment sectors,Exploration & ProductionTransportationDistributionLNG regasification terminalsPower generationFertilizersPetrochemicalsCity gas distribution