India Changes Rules for City Gas Licences
India's downstream regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB), announced April 4 significant changes to the rules for obtaining licences for city gas distribution (CGD) and for retailing compressed natural gas (CNG).
Under the new bidding criteria, 80% weighting (compared with 0% earlier) is allotted to infrastructure creation. In case of CGD, entities shall be asked to detail how many domestic cooking gas connections will be added in the first eight years of operation. Bidders quoting higher numbers would be given more marks.
Also under the new rules, tariffs charged for transportation of piped natural gas within the CGD system will be given only 10% weighting; previously this was the deciding criterion for winning a licence. Bidders will also be required to quote the length of new pipeline they would lay on winning the licence.
Minimum net worth for qualification ranges from rupees 0.5bn, or $7.7mn (for areas with 0.1mn population and lower) to rupees 1.5bn (for areas with 5mn population). For areas with populations over 5mn, it is rupees 0.3bn for every 1mn people. Previously, the qualification ranged from rupees 0.05bn (0.1mn population) to rupees 1.5bn (5mn population).
PNGRB said that entities having experience of at least one year in operation and maintenance of a CGD network and having sufficient technically qualified personnel would be eligible for bidding, as per the terms of the bid.
According to the new rules, the successful CGD licence bidder needs to enter into a firm natural gas supply agreement with a producer or marketer on the arm's length principle within 180 days of winning a license. The winning company would have eight years of marketing exclusivity in the given city, which is an increase from the current five-year licences.
CNG is mainly used as a fuel for natural gas vehicles (NGVs). According to industry association IANGV's statistics for 2018, India has just over 3mn NGVs ranking it third behind China and Iran as the world's third largest NGV market by vehicle numbers. Roughly 1.45% of vehicles on India's roads are NGVs.