City gas distribution (CGD) involves supplying natural gas to retail customers through pipelines and compressed natural gas stations. CGD began in India in 1880 but expanded significantly after 1998 when the Supreme Court mandated converting Delhi vehicles to CNG. The Petroleum and Natural Gas Regulatory Board regulates CGD and authorizes operators but was ruled to not have power until section 16 of its act was notified in 2010. CGD has now spread to several states and over 300 geographical areas present opportunities for investment in gas infrastructure.

1. Sneha Santra
Maitraiyee Jain

2. City Gas Distribution
 CGD is commonly described as the final component of
the natural gas value chain.
 CGD is that segment of the chain which makes natural
gas available to customers for use as transport and
cooking fuel besides commercial and industrial uses

3. Low pressure pipelines
 While large consumers of natural gas such as the
power and fertilizer industry receive natural gas
directly through the high pressure interstate
transmission pipelines, CGD is provided through a
network of medium to low pressure distribution
pipelines by a local distribution company

4. Retail customers
 CGD involves supply of small volumes of gas to a large
number of retail customers. It comprises compressed
natural gas networks that supply natural gas for
automotive use through CNG dispensing stations and
piped natural gas (PNG) network that provides natural
gas
as
a
fuel
for
city
based
commercial/industrial/domestic purposes

5. History
 CGD in India began as early as 1880 when the calcutta
gas company limited began to undertake gas retail
business. It depended on coal gas and still operating
though incurring loses.
 Since 1970 onwards CGD operations were undertaken
by various players but these were limited to Delhi,
mumbai, and several cities and towns in Gujarat.

6. Supreme court
 The big boost for CGD growth came in 1998 when the
supreme court issued orders to convert all public
transport vehicles plying in Delhi to CNG in response
to a public interest litigation filed seeking a solution to
the rising air pollution in Delhi.

7. CGD in many towns
 Since 1998 number of rulings had given boost to the
development of CGD in India. Other than major cities
where the pollution and particulate matter levels are
high and there is judicial and public pressure to
control it most of the CGD growth has happened in
areas which are close to existing transmission
pipelines.

8. KG D-6 Block
 Since the commencement of production of natural gas
from the Krishna-Godavari D 6 block the efforts and
demands of various states have intensified.
 Some of the cities however cannot get natural gas
immediately, as the current transportation network is
yet to reach many potential consumption centres.
 The spread of CGD to other regions depends on the
growth of the transportation network .

9. Spread of CGD
 The spread of CGD has been determined by available
sources of natural gas, existence of transmission
pipelines and in case of major cities by legal orders.

10. CGD in states
 The CGD has spread to the following states,
 Delhi
 Maharashtra
 Gujarat
 Andhra Pradesh
 Tripura
 Uttar Pradesh

11. PNGRB
 Since the PNGRB came in to existence in 2007, it had
given a priority to CGD. It had notified CGD and
pipeline regulations in 2008. It has issued CGD
authorization for several towns in three rounds of
bidding
 PNGRB invites bids and issue authorization for city gas
distribution.

12. Geographical areas (GA)
 The PNGRB has so far indentified about 335 GA’s to
invite bids in the next 2-3 years.
 Of these 243 GA’s have been indentified by the PNGRB
on a suo moto basis while the others were finalized
based on the EOI’s submitted by entities interested in
the business.

13. Issue
 IGL had been implementing CGD in Ghaziabad before
the PNGRB came in to being.
 After its inception the PNGRB
rejected IGL
contention that it was authorized by the supreme
court and government to undertake CGD operations in
Ghaziabad and it had invited bids from entities for
undertaking operations in Ghaziabad.

14. Issue
 Indraprastha Gas Ltd (IGL) and a non profit
organization voice of India has challenged the PNGRB
notification for bid in Ghaziabad in Delhi High court
stating section 16 has not so far notified by the
Government, so PNGRB has no authorization to issue
licenses for city gas distribution network.

15. DELHI HIGH COURT
 In pursuance of the challenge by Indraprastha Gas Ltd
(IGL) the Delhi high court ruled on January 10, 2010
that the petroleum and natural gas regulatory board
did not has power to issue city gas licenses
 The High court ruled since the government had not
notified section 16 of the PNGRB act, the downstream
regulator did not have powers to grant authorization
for beginning city gas distribution
 The board was constituted in 2007 without section 16
of the act being notified.

16. DELHI HIGH COURT
 The High Court judgment says “ In view of non
notification it is held that the board has no power to
grant authorization to entities which applied to it for
laying, building, operating or expanding city or local
natural gas distribution networks….this is in
consonance with the central government’s stand in the
counter affidavit filed before the court”

17. DELHI HIGH COURT
 The Delhi high court has held “ Any authorization
given by the board cannot be termed as a valid
authorization as section 16 of the PNGRB act has not
yet been notified by the government”

18. SUPREME COURT
 Against the order of the Delhi high court, PNGRB
preferred an special leave petition in the supreme
court of India
 The supreme court stated the PNGRB board can only
process pending applications, but it cannot process
any final orders.

19. GOI notified section 16
 In July 2010 the Union government notified section 16
of the PNGRB act 2006, to allow the board to process
CGD applications.

20. Supreme court
 In may 2011 the supreme court empowered the PNGRB
to issue CGD licenses.

21. Clarity in policy
 Continuous supply of gas requires clarity in policy,
legal and regulatory reforms besides
development of important infrastructure.
rapid

22. Investment opportunities
 The Indian gas market has significant potential but is
expected to face supply constraints in the foreseeable
future. The increasing demand supply gap presents a
major opportunity in foreign Investment in the sector.
 These factors can open up several opportunities for
partnerships and collaborations between the gas
exporting countries and India, given their need for
steady revenue and India’s requirements for LNG
supply, storage, pipelines, city gas distribution as well
as power plants.

23. Areas to invest
 These are the investment sectors,
 Exploration & Production
 Transportation
 Distribution
 LNG regasification terminals
 Power generation
 Fertilizers
 Petrochemicals
 City gas distribution