GAIL and GSPC rivalry block Vadodara CGD expansion

Vol 11, PW 23 (15 May 08) Midstream & Downstream

Ambitious plans to expand and modernise the 39-year old City Gas Distribution network in Vadodara are gathering dust because Gujarat state authorities in Gandhinagar are trying to force foist GSPC on city councillors at the expense of GAIL.

Owned and controlled by Delhi, GAIL has long sought control of the gas market in Gujarat, but is coming up against consistent pressure from Gujarat government-owned GSPC. Rivalry between the two in Vadodara, Gujarat’s fourth major city with a population of 1.6m, erupted in September last year when elected members of the Vadodara Municipal Corporation (VMC) were debating a joint venture proposal with GAIL when political bosses in Gandhinagar intervened to sabotage the proposal in favour of GSPC.

Given the sensitivities involved, nobody is willing to speak on the record but during a visit to Vadodara last week PETROWATCH learnt that municipal officials have decided to drop the JV proposal with GAIL with a â€کnote’ that “the appropriate decision will be taken after similar proposals are received from other players (read: GSPC).â€‌ GSPC, however, has not responded.

“We are not interested in entering a JV with private players,â€‌ reports a VMC source, diplomatically. “Proposals are awaited from GSPC and GAIL.

â€‌ At first glance, GAIL, not GSPC, is the obvious JV partner: Vadodara already buys 100,000 cm/d from GAIL at Rs6000 per thousand cubic metres for sale to 70,000 customers of whom 67,000 are households and the rest commercial. As with the rest of Gujarat demand is soaring and authorities predict more than 400% increase in its customer base to 300,000 customers as demand rises in tandem with the city’s fast growth.

Vadodara city authorities are ill equipped to meet this demand on their own, hence the proposed JV with GAIL. Without help, Vadodara authorities can add up to 70,000 more customers only.

“We are refusing new gas connections,â€‌ confirms a VMC source. “Any additional gas will be at a much higher price and that would mean restructuring the present tariff.

We operate a no-profit no-loss operation and don’t have the money, technology or skills to fund expansion.â€‌