Interview with Raman Chadha: “GAIL Gas plans to invest Rs 10 billion in 2022-23”

“GAIL Gas plans to invest Rs 10 billion in 2022-23”

Raman Chadha, chief executive officer, GAIL Gas Limited

Incorporated in 2008 for the smooth implementation of city gas distribution (CGD), GAIL Gas Limited has been a key player in the distribution and marketing of natural gas. With a strong commitment to customer care and value creation, GAIL Gas has grown in size and stature. With a modest start with four geographical areas (GAs) in 2009, today GAIL Gas is authorised to implement the CGD project in 16 GAs, two of which have been won in the recently concluded 11th and 11-A bidding rounds. GAIL Gas, along with its joint venture (JV) companies, covers 208,162 square km of area. Currently, GAIL Gas along with its JV companies has a presence in 25 GAs across 14 states. In a recent interview with Smart Utilities, Raman Chadha, chief executive officer, GAIL Gas Limited, discussed the progress of the company, the challenges faced by it and the future outlook…

What is the current status in terms of network, stations, etc.?

With a focused approach to expanding the gr­een energy footprint in the country, GAIL Gas is pursuing the CGD business in Andhra Pra­desh, Karnataka, Rajasthan, Vadodara (Guja­rat), Haridwar (Uttarakhand), North Goa, and Assam through its JVs. It has also formed a JV, RSGL, with the Rajasthan Gov­er­n­ment to implement CGD projects in the GAs of Kota and Gwalior (except areas already authorised) and Sheopur district. Similarly, the company has tied up with the Andhra Pradesh Go­v­ernment and the Vado­dara Mahanagar Sewa Sadan for the implementation of CGD projects in the GAs of East Godavari and West Godavari districts, and Vadodara district respectively.

GAIL Gas has also joined hands with Bha­rat Petroleum Corporation Limited (BPCL) for CGD projects in Haridwar district in Utta­rak­hand and in North Goa district in Goa. To further reach the north-eastern states, a JV has been formed with Oil India Limited and Assam Gas Company Limited to implement CGD projects in the GAs of Kamrup and Kam­rup Metropolitan districts and Cachar, Hailakandi and Karimganj districts.

GAIL Gas, along with its JV companies, has connected around 0.77 million kitchens, provided more than 3,790 industrial and commercial connections, and set up 342 compressed natural gas (CNG) stations in various modes – online, daughter booster and mother stations.

As far as the network is concerned, GAIL Gas and its JV companies have created an ex­tensive CGD network of around 11,000 km. We have digitalised many of our services being offered to piped natural gas (PNG) customers. Automation of many other activities such as metering and change in prices at CNG stations is in progress. This will help us reduce manual intervention in carrying out our day-to-day activities and increase customer satisfaction.

“GAIL Gas and its JV companies have created an extensive CGD network of around 11,000 km.”

What is the break-up of different industry segments – PNG versus CNG and domestic versus commercial versus industrial – for GAIL Gas?

GAIL Gas is catering to all four segments of the CGD industry, that is, industrial, commercial, CNG and domestic, in its authorised GAs. If we look at the percentage contribution of the different segments, unlike other CGD entities wh­e­re CNG volumes get the majority share of gas consumption, GAIL Gas is well placed, with its hi­ghest gas consumption coming from the ind­ustrial and commercial segment, which is foll­ow­ed by the CNG and domestic segments.

What are the challenges for GAIL Gas in ter­ms of network expansion? How are they be­ing addressed?

For creating CGD infrastructure such as pipelines, permissions are required from various authorities. These permissions take substantial time, which adds to the cost of the project aside from the exorbitant charges that are levied by these landholding agencies, which differ from one agency to another. Most of the time there is a lack of coordination between these agencies and there is no standardisation in the charges being levied on CGD entities seeking permission for laying pipelines.

GAIL Gas takes proactive measures and applies for permissions from various landholding authorities well in advance after doing a route survey and assessing the anchor load demand in the area. The details required for processing the request for permission are provided without delay.

GAIL Gas has been requesting for the standardisation of permission charges on various forums for CGD. Issues relating to delays in permission are also being taken up with the Fede­ration of Indian Petroleum Industry, which has been designated as the nodal agency for all CGD entities to take up various permission-re­lated issues with the state governments/de­part­ments concerned through the Ministry of Petroleum and Natural Gas.

What have been the challenges in terms of gas availability on the supply side?

The supply of natural gas in most of the GAs is being done through connectivity with the nearest natural gas transmission pipeline. GAIL Gas has been successfully supplying PNG and CNG to its customers with connectivity from GAIL’s tra­nsmission pipelines. There are a few GAs where GAIL Gas has started supplying gas by so­urcing liquefied natural gas (LNG) and coal bed methane as well.

However, if we look at the pan-Indian scenario, domestic PNG (DPNG) connections have increased from 2.5 million to 9.3 million and CNG stations have increased from 947 to 4,433 from March 2014 to March 2022. Currently, the demand from the PNG (domestic) segment and the CNG (transport) segment is being met by domestic gas allocated to CGD entities. How­ever, a fall in domestic gas production coupled with increased demand for natural gas in the Indian market has made LNG imports significant to meet the energy requirement.

Going forward, as India aims to achieve a 15 per cent share of natural gas in the prima­ry energy mix by 2030, gas consumption will have to reach 590 mmscmd. Domestic pro­­d­uction coupled with LNG imports and CBG production will be able to cater to 380-400 mmscmd. However, for meeting additional de­mand, various interventions including ad­di­tio­nal supply sources and infrastructure would be required.

What is the expected capex and what will be the growth in terms of CNG stations or PNG connections by 2022-23?

GAIL Gas has invested around Rs 34 billion as capex in its GAs and is expeditiously implementing the CGD project. GAIL Gas plans to set up around 150 CNG stations and more than 0.15 million DPNG connections in financial ye­ar 2022-23. To meet the targets set for the current financial year, we plan to invest another Rs 10 billion in 2022-23.

What impact does GAIL Gas see, if any, of the green hydrogen policy?

India is one of the fastest growing energy consumers in the world. With the growing populati­on and urbanisation, there will be a need for cl­e­an and affordable energy. Currently, the share of natural gas in India’s primary energy basket is 6.7 per cent, which the government targets to increase to 15 per cent by 2030.

The government’s National Hydrogen Mis­sion is a visionary step for securing India’s fuel energy needs and meeting the future demand for energy in the transportation, industry and other sectors.

Blending hydrogen with PNG/CNG will not have any negative impact on the growth of CGD companies. The government plans to blend 15 per cent of hydrogen with PNG for do­mestic, in­dustrial and commercial con­sump­tion and 18-20 per cent with CNG. This will make more domestic gas available for the CNG (transport) and PNG (domestic) segme­nts, helping in the further expansion of CGD projects in authorised GAs.

Is GAIL Gas more optimistic or less optimistic about the CGD sector than it was a year ago?

In the past three to four years, the CGD sector has seen unprecedented growth in terms of the number of awarded GAs, DPNG connections, CNG stations and gas sales volumes. CGD entities are expected to achieve around 120 million DPNG connections and more than 17,000 CNG stations over the next eight years. The performance of all CGD entities had been affected by Covid-19 in the past two years due to the unavailability of manpower and delays in receiving permissions from various authorities. Disruption in the supply chain of original equipment manufacturers also affected the supply of equipment such as compressors, dispen­se­rs, cascades, meters and regulators, which are essential for any CGD company to expand its operations.

GAIL Gas has done exceedingly well and has clocked the highest ever revenue of Rs 68.53 billion and profit after tax of Rs 2.83 billion in financial year 2021-22, which is a signifi­cant jump of 71 per cent and 79 per cent res­pec­tively over the previous year. Further, GAIL Gas along with its JV companies has set up 15 per cent more CNG stations in 2021-22, taking the count of total CNG stations to 342. With the opening up of the economy post-Covid-19, most CGD entities are already operating at the pre-Covid levels and GAIL Gas is committed to performing better in the coming years.