RIL, GAIL apply for gas retail licence

Reliance Industries, India's largest company by market capitalisation, and GAIL India, the largest transporter and marketer of gas, have sought licences to sell natural gas to households and vehicles across 60 cities in India.

RIL and GAIL India, through their wholly-owned subsidiaries Reliance Gas Corporation and GAIL Gas, have submitted expressions of interest to the Petroleum and Natural Gas Regulatory Board for cities, including Hyderabad, Chennai, Kolkata, Bangalore, Jhansi and Sonepat.

Both firms, through their wholly owned subsidiaries Reliance Gas Corporation and GAIL Gas, respectively, have submitted expressions of interest (EoI) to the Petroleum and Natural Gas Regulatory Board (PNGRB) to sell the gas in cities such as Hyderabad, Chennai, Kolkata, Bangalore, and even smaller ones like Jhansi and Sonepat.

Setting up the gas infrastructure in these cities would involve an investment of around Rs 48,000 crore (around $11.5 billion) over the next 4-5 years.

Reliance Gas has submitted EoIs for 54 cities while GAIL Gas has shown interest in eight cities. Except for two cities, Ghaziabad in Uttar Pradesh and Gwalior in Madhya Pradesh, there are no overlapping bids by the two companies.

"Contracts for laying the pipeline network in the identified cities is likely to be awarded by December," said B S Negi, member of PNGRB.

According to the regulations for city gas distribution approved by the regulatory board in March this year, licences for all the 60 cities will now be put up for bidding. The company that wins the bid will get the right to lay pipeline networks and retail gas to households and vehicles in that city.

Industry experts are, however, worried by the limited number of players that have shown interest in city gas projects so far. "It is still early but the fact that only two companies have given expressions of interest is worrisome to an extent," said a Delhi-based analyst.

The limited response may be due to the strict bidding criteria with the PNGRB making it mandatory for bidding companies to have a source of gas that will feed the cities. Both Reliance Gas and GAIL Gas have access to gas.

British Gas India, which distributes gas in Mumbai through Mahanagar Gas and in Gujarat through Gujarat Gas, is still working out options for an expanded role in supply of gas to cities. "We are still examining how we can go ahead," said a British Gas spokesperson.

Indian Oil Corporation, the country's largest crude oil refiner and marketer of petroleum products, is also planning to bid for city gas licences.

The PNGRB, however, says it is satisfied with the response so far. It will not identify any city on its own for bidding, something it had earlier planned. "There is no need for us to identify any city on our own. In the last 15 years 22 cities have been covered. So 60 new cities is good enough for now," Negi said.

PNGRB will give time until the end of the month for "public consultation" on the expressions of interest for these cities. The board will then put up for bidding the rights for gas distribution in another 15 days. "The bidding process will start by the middle of August and end by mid-October," said an official with a gas company.

Eyeing Big Bucks

Setting up gas infrastructure in these cities would involve an investment of around Rs 48,000 crore (around $11.5 billion) over the next 4-5 years

Reliance Gas has given EoIs for 54 cities and GAIL Gas has shown interest in eight cities

Approved by the regulatory board in March this year, all the 60 cities will now be put up for bidding

The company, which wins the bid, will get the right to lay pipeline networks and retail gas to households and vehicles in that city