Who will benefit from 9th CGD bidding round?

The bidding criteria for this round has been revised in such a way that 80% weightage is assigned to infrastructure creation

Jul 23, 2018 05:07 IST India Infoline News Service

PNGRB (Petroleum and Natural Gas Regulatory Board) had launched 9th CGD (City Gas Distribution) Bidding Round for 86 Geographical Areas (GAs) covering 174 districts in 22 States/Union Territories. The GAs, post award are expected to cover 24% of the country's area (11% FY18) and 29% of its population. Further, 406 bids have been received in respect of 86 GAs; and 38 entities have participated in the process.

In previous bid rounds, 106 GAs were offered, out of which 56 were awarded. Currently, ~95% of CGD volumes are sold in Northern and Western India. This 9th bidding round provides GAs the access to vast untapped areas in Eastern and Southern India. Once awarded, this initiative would help in creating a robust CGD infrastructure by bringing investment of about Rs70,000cr. This latest bidding round is made investor friendly with marketing exclusivity increased from 5 years to 8 years, the time for financial closure is increased to 270 days from 180 days earlier and gas pipeline company to provide connectivity within 180 / 270 days.

The bidding criteria for this round has been revised in such a way that 80% weightage is assigned to infrastructure creation, which was not included in earlier bids. This modification is done with a view to maximize the gas network penetration.

After closure of bid submission, Adani Group, IOC and Bharat Gas Resources emerged as the top bidders. IOC bid for 34 places on its own and another 20 in partnership with Adani Gas. Moreover, Adani Gas bid for 32 cities on its own, followed by Bharat Gas Resources, unit of BPCL with 53 bids and GAIL Gas with 34 bids respectively.

Indraprastha Gas (IGL) has bid for 11 areas. Company has presence of CGD network in Delhi and NCR. Most of the newly bid areas by IGL are in surrounding areas of its current GAs. These new GAs are expected to bring cost synergies to IGL extending expertise from Delhi & NCR operations.

Mahanagar Gas (MGL) on the other hand has bid for 3 major GAs, which include Chennai and Visakhapatnam. These are in close vicinity of gas producing areas and expected to benefit from low transportation tariffs.

Even though, these companies (IGL & MGL) have placed lower GA bids as compared to other major bidders (IOC, Adani and Bharat Gas), their existing and newly bid areas combined have higher population density. MGL’s GA network would have average population density of ~11,271 people per sq km and that of IGL would have average population density of ~2,255 people per sq km as compared to IOC/Adani/Bharat Gas Resources (~924/1002/985 people per sq km). This is expected to lead to better volume growth visibility for MGL and IGL, being well established players in CGD operations.

Related Story

Open Free Demat Account (Rs699)