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‘Non-availability of D6 gas hurting us’

If there is something that was changing a common man's energy habits in cities, it is the use of natural gas as cooking and transport fuel. Grand expansion plans, however, have to wait, going by the views of M Ravindran, managing director of trend setter Indraprastha Gas Ltd. In an interview, he says gas availability is a challenge. Edited excerpts:

How is IGL planning to expand operations?

We are expanding in all areas, primarily in the NCR (national capital region). With the court giving permission for more autos and cluster bus in Delhi, we have to make our infrastructure cope with the requirement. We have requested the Delhi government for a monitoring committee and land for 15-20 stations, but getting additional land is not easy.

We are also trying to de-bottleneck existing stations. A queueing analysis is on. If 45,000 more autos come in, we need to ensure there is no more piling of autos on the road. We have also taken action for additional hardware equipment.

Are you planning to buy British Gas stake in Gujarat Gas?

There is no thinking right now. The promoters (GAIL and BPCL) will take a call on this. We have enough right now on our hands but we will be expanding.

Which segment of the business will see growth in sales volume?

Our main thrust is CNG. We are also focusing on industrial and commercial mainly in the NCR because primarily industry will come up that side. We are putting up infrastructure in those areas of Delhi which are in new industrial zones.

The volume growth is 25 per cent, with the major increase being on the industrial side. Our sales are likely to be 3.1 mscmd in the current year, of which 2.61 mscmd will be CNG, 0.13 mscmd will in domestic and 0.5 mscmd in industrial totalling 6.34 mscmd. In 2012-13, it will rise to about 4 mscmd with CNG being 2.97 mscmd, 0.16 mscmd in domestic and 0.9 mscmd in industrial.

Won't the increased dependence on RLNG impact your margins, since domestic gas production is not likely to increase in the near future?

Currently, APM gas is 2.7 mscmd. RIL’s D6 allocation was 0.135 mscmd but it is almost zero now. Then there is 0.75 mscmd of Marubeni RLNG sourced from GAIL and 0.4-0.5 mscmd of other RLNG from GAIL and BPCL. The balance comes through spot purchases.

Margins will not be under squeeze because we are proportionately trying to pass on whatever increase in gas cost is there to customers. On industrial and commercial side, there is no issue at all since we pass on the impact, whether in terms of dollar fluctuations or gas sourcing. There is fortnightly billing. Only on the CNG side, will we see that customers are not affected to a large extent. We try to economise by taking a mix of weighted average of gas price. The advantage in Delhi is that we are getting low cost gas. The thrust is to get gas at medium price.

When you last revised the prices, the exchange rate was Rs 49 to a dollar. How are you tackling the rupee depreciation?

We will take a view this month or early next month. The way dollar is appreciating, we want to take an overall view to hedge our risk. Earlier, the rupee was not impacting us much but the situation is now beyond our control. We took Rs 50 exchange rate at the time of last price hike on October 1. Every rupee makes an impact of 50-60 paise on every kilogramme of end price. The rupee impact alone since the last like of September will be Rs 1.50 a kg.

Another hit we are taking is the non-availability of D6 gas since September 28. We are sourcing spot gas to make up for this.

Have you approached the government for not using dollar denominations for domestic gas?

It is a policy decision. Domestic prices were earlier in rupees. The government is today sensitised about it. It should take a parity view and have a uniform policy for all fuel.

How does the current quarter look like for the company?

This quarter looks under pressure. There will be downside because of the rupee and also gas availability. Next quarter, we will have to fine-tune.

The boom which was expected in the CGD business has not happened. Why?

It has not taken off the way it was projected. The regulations should have been made more flexible, understanding the stakeholders' opinions. Everybody had told them that under the bid criteria, it was difficult to award anything. That is the reason that after the first round, none of the rounds could progress. There is a mood now to go in for a review of regulations. We lost two-three years.

There will be a big boom, provided the availability of gas improves. RIL, GSPC and ONGC should be coming up with more production from 2013-14 onwards, and with the recent GAIL landmark LNG deal, the situation should improve.

What are the problems that you encounter in the business?

Eighty per cent of our problems are with respect to infrastructure laying and approvals -- whether it is Meerut, Delhi, Devas or Kota. We have taken up issues with the regulator who has made chief secretary of every state as the nodal officer, but that does not help much. The local authorities should not use CGD companies for revenue generation. It unnecessarily shoots up the cost of providing CGD. We will still manage but smaller companies will not be able to survive.

For CNG, there is land issue. The rates are high because the same land for mall and shopping complex earns more revenue.

There is also the taxation issue in Uttar Pradesh but the state does not want to lose revenue on it. We want declared goods status which has been given to CNG but not to natural gas.

Besides, for CNG stations, we need 15-20 approvals. It takes eight to nine months to commission a station even when it is ready. Our assets lie idle till then.

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