Adani and Indian Oil win Ghaziabad gas retail licence

Vol 13, PW 8 (24 Sep 09) Midstream & Downstream
     

If you can’t beat them join them! First it was GAIL Gas that caused a furore by charging zero gas transportation charges to consumers (â€کnetwork tariff’) and winning four city-gas retail licences in March.

Now, Adani Energy with Indian Oil has taken a leaf out of GAIL’s book and won the licence for Ghaziabad on September 22 in India’s second auction of retail gas licences. “We quoted â€کzero network tariffs’ for the entire 25 years of the licence,â€‌ says a source in the Adani-IOC joint venture.

With this move Adani and IOC have undercut competitors Gujarat State Petronet, Indraprastha Gas, HPCL, and ironically, GAIL Gas. “Others charged a near â€کzero network tariff’ for the first seven or eight years, followed by a â€کnominal tariff’,â€‌ adds our Adani-IOC source.

“Our strategy was – if we’re not going to make money from the â€کnominal tariff’ why even charge that!â€‌ Of course, Adani and IOC are not running a charity, rest assured. “Our money will come from â€کmarketing margins’ (profits on gas sold to customers), which are still unregulated because the government hasn’t given this power to the regulator.

â€‌ More, Adani and IOC are not worried about opening up the Ghaziabad network to competitors in the sixth year. “Only a company with an assured supply of gas would come in to the market after six years (read: GAIL),â€‌ says our source.

“If GAIL tries to enter and spoil our market we can return the favour by doing the same in their areas.â€‌ Threats apart, Adani and IOC are confident that over time a system of “adjustment, arrangement and cooperation will emerge between the major CGD players.

â€‌ Adani and IOC complement each other: IOC has gas thanks to its stake in Petronet-LNG; Adani has experience running city gas networks in Ahmedabad, Vadodara and Faridabad. “Within the next three to four years we want to be in 30 or 40 cities,â€‌ says our source.