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Challenges & Issues in Natural Gas Distribution Industry

Anirbid Sircar

Abstract


Natural Gas Distribution or City Gas Distribution (CGD) in India is at a nascent stage. Before the establishment of Petroleum and Natural Gas Regulatory Board (PNGRB), the sector was unstructured and direction-less at times. With the formation of PNGRB, the safety practices of CGD business were looked into and guidelines were framed. However, the initial legal disputes within PNGRB retarded the growth. The first three bidding rounds in the sector brought out many issues and challenges. The CGD entities along with PNGRB tried to resolve the issues but some of them still remain unsolved in the fourth, fifth and sixth bidding rounds. The allocation priority of gas in this sector over power and fertilizer definitely boosted the sector considerably. In this paper, an attempt has been made to analyze the CGD sector, dissect the problems faced by the government, CGD entities, vendors, third party service providers, consumers and market. The analysis is narrated under various macro headings and subpoints are described in order to show the effect of the same on the sector. The challenges revolve around issues affecting project Internal Rate of Return (IRR), project investment rate of return, market exclusivity, gas allocation, gas availability issues, logistic and manpower issues. The influence of the sector on customer base, tariff recovery mechanism, innovations, finance and health, safety and environment (HSE) is also discussed in this paper.

Keywords: natural gas, Petroleum and Natural Gas Regulatory Board (PNGRB), City Gas Distribution (CGD), issues


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