Poor interest likely in second gas retail licence auction

Vol 12, PW 24 (07 May 09) People & Policy

Widespread discontent over India’s first auction of gas retail licences has cast a long shadow over the second auction that is underway now.

By June 25 the Petroleum and Natural Gas Regulatory Board has asked interested companies to submit bids for seven towns and cities: Ghaziabad on the outskirts of Delhi in Uttar Pradesh; Chandigarh, the capital of Punjab and Haryana states; Shahdol, in a heavily tribal populated area of Madhya Pradesh; Yanam, in the former French colony of Pondicherry; Rajahmundry, in the gas-rich (onshore) KG Basin in Andhra Pradesh; and Allahabad and Jhansi, also in Uttar Pradesh. “I would not be surprised if some of these cities fail to receive bids,â€‌ predicts a potential bidder.

“Most of them have only a few industrial or commercial users and the populations are small.â€‌ Chandigarh, designed by French architect Le Corbusier, could be an exception.

“Chandigarh is a big city with industrial customers,â€‌ adds a source. “But it has no trunk transmission pipeline connectivity.

There’s no point in bidding for this city until there is connectivity.â€‌ GAIL, it seems, won’t lay a trunk transmission pipeline to Chandigarh until 2011, leaving CNG, brought in by trucks, as the only immediate commercial option.

Ghaziabad is a peculiar case. “GAIL already supplies gas to most of the malls and commercial establishments,â€‌ we hear.

“It makes no sense for anybody else to go there.â€‌ Shahdol, in Madhya Pradesh, is near two Reliance CBM blocks, “but there’s hardly any market for CNG or PNG.

â€‌ There’s also surprise over the choice of Yanam, a former Dutch and French territory on India’s south east coast, because its small size and population do not make CGD investments viable. Rajahmundry in Andhra Pradesh has some industrial demand, we hear, but even though it is near Reliance’s D6 discoveries, “Reliance will always play second fiddle to (GAIL and HPCL affiliate) Bhagyanagar Gas, just as it did at Kakinada in the first auction.

â€‌ Allahabad and Jhansi in Uttar Pradesh are likewise considered poor business prospects and, “were most likely selected for their political importance.â€‌