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India launches biggest city gas distribution auction

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On May 8, 2018, India launched auction for 9th city gas distribution (CGD) licensing round offering permits for selling compressed and piped natural gas (CNG and PNG).

India launches biggest city gas distribution auctionDetails pertaining to 9th CGD licensing round:

This auction is being considered as the biggest so far as it will offer permits for CGD in 86 geographical areas.

  • 9th CGD licensing round will be different from previous rounds as certain changes have been made to the bidding conditions in order to generate greater return from the exercise.
  • One such change is granting utilities status to CGD networks by the Union Labour Ministry.
  • Weightage to number of piped gas connections proposed in eight years from the date of authorisation has been increased from 30% to 50%.
  • In addition to this, a floor tariff of Rs 30 for city gas and Rs 2 per kg for CNG has been set to prevent bidders from quoting unviably low tariffs.
  • Net Worth eligibility: to bid for cities with a population of 50 lakh and more, net worth of the company should not be less than Rs 150 crore, to bid for cities with a population of 20 – 50 lakh and more, net worth of the company should not be less than Rs 100 crore. Firms with Rs 5 crore net worth are eligible to bid for cities that have less than 10 lakh population.
  • Companies that are awarded the license would have 8 years of marketing exclusivity in the city, as against the current 5-year licence.
  • Cities for which CGD licences are on offer include: Ahmednagar, Allahabad, Amethi, Alwar, Barmer, Bhopal, Coimbatore, Jalandhar, Ludhiana, Salem, Rai Bareli, Burdwan and Dehradun.

Expected benefits from 9th CGD licensing round:

Awards from the 9th CGD licensing round would extend gas coverage to 174 districts in 22 states and Union Territories, covering 29 per cent of India’s area and 24 per cent of the population.

  • So far, 91 geographical areas have been awarded which covers only 11 per cent of area and 19 per cent of the population and that too concentrated in the northern and western regions of India.
  • Petroleum and Natural Gas Regulatory Board (PNGRB), which organised a road show to promote the auction, expects that this round will attract investment to the tune of Rs 70000 crore.
  • Union Petroleum Minister Dharmendra Pradhan is hopeful that this round of auction will be instrumental in raising the gas share in India’s energy mix from 6.2 per cent to 15 per cent in a few years.