In yet another move, the Centre has come up with an incentive scheme targeted at City Gas Distribution (CGD) companies to promote domestic piped natural gas (PNG). Last April, it had issued stringent orders prohibiting ownership of both PNG and LPG connections, directing consumers to surrender their domestic LPG connections.
Besides holding two active connections, many users had unbilled PNG connections as they were using LPG. Through the proposed incentive scheme, the Centre aims to not only expand the PNG network to newer areas but also convert the idle PNG connections into active ones. Concerted efforts include awareness campaigns, issuing notices to consumers with dual connections and building a consumer-friendly unified single-window portal for easy surrender of redundant LPG connections.
The US-Iran conflict has highlighted the need to accelerate PNG expansion, as most of the country’s LPG requirement comes through the disputed Strait of Hormuz, which has now become a chokepoint. Moreover, India hardly has any strategic reserves of LPG in case of a supply disruption. In contrast, half of the current LNG demand could be met from domestic sources, and the rest from diverse suppliers, and its transit is not through the Persian Gulf chokepoint.
There is also a clean energy angle since PNG reportedly produces fewer pollutants, resulting in improved indoor air quality and lower carbon emissions. In a country which has recorded numerous LPG cylinder-related serious and fatal accidents, natural gas is far safer as it is lighter than air and therefore quickly disperses in case of a leak. As it is supplied through underground pipelines at low pressure, it significantly reduces risks associated with cylinder storage and handling. According to the government, PNG is relatively less expensive than LPG on a per-unit energy basis, which can help reduce household fuel expenses. On top of that, there will be no hassle of booking and storing cylinders.
Yet the expansion has been at a tardy pace due to infrastructure constraints. The CGD entities' reluctance is due to the high capital expenditure involved in laying underground pipelines, last-mile pipelines to individual kitchens, and installing metering equipment. Furthermore, it takes nearly a decade to recover the capital costs. Thus, despite aggressive efforts by the Centre, there are only about 1.74 crore PNG connections as against over 33 crore LPG connections.
Under the incentive scheme, the CGD entities will receive an additional allocation of domestically produced and lower-priced natural gas for every incremental billed domestic PNG connection. This will result in substantial savings, and to further boost it, the Centre has been persuading state governments to reduce VAT on natural gas to 5%. The cumulative savings are likely to shrink the period to pay back capital costs to a mere three years.
Another major bottleneck is finding a right-of-way to lay the pipelines in areas where water, sewage, power and telecom utilities have already taken up space under the city road network. Cognisant of the issue, the government streamlined the process and also standardised charges. But local bodies have their own constraints relating to financial and bureaucratic hurdles, while residents' associations and housing societies too face obstacles in facilitating plumbing for retrofitting. The success, therefore, hinges on the grunt work of getting multiple stakeholders with diverse constraints to raise their individual games in a synchronised manner.