IGL invests in extending CNG sales reach

Vol 17, PW 4 (19 Sep 13) Midstream & Downstream

Indraprastha Gas (IGL) is going ahead with its Rs400cr ($61m) CAPEX plan in 2013-14 to expand its network of CNG stations and pipelines to sustain the high growth of its overall gas sales.

BSE-listed IGL is worried about long term pressure on overall gas sales - likely to grow 8% this year, down from last year's 10% growth. Delhi-based IGL wants to lay steel and medium density polyethylene pipelines to connect up to 20 new CNG stations this year and provide gas connections to more households.

IGL estimated its CNG sales will only grow 5% this year against 8% in 2012-13. This is partly because the Delhi Transport Corporation (DTC) has so far added only around 50 of the 5100 new CNG-fuelled buses it is planning to add to its current fleet of 6000 by March 2014.

Growth is also slowing because of delays securing approvals to lay pipelines to households. “Every year 90,000 new households apply for gas (in Delhi, Ghaziabad, Noida and Greater Noida)," we hear.

"But we cannot connect more than 60,000 or 65,000 households because approvals take so long.” Piped gas sales to households are set to grow 15% this year against 18% in 2012-13.

Further, IGL complains about the 26% VAT on gas in the Uttar Pradesh towns of Ghaziabad, Noida and Greater Noida. Yet furnace oil is taxed at just 5%.

“UP’s tax structure discourages gas users,” says IGL. As a result, IGL expects piped gas sales to factories to grow by 5% to 7% in 2013-14 against 8% last year.