The PNGRB has set a tough Minimum Work Programme (MWP) for each Geographical Area, thereby making it challenging for City Gas Distribution (CGD) units to stick to it.
8The first year target has been set at 15% of the total connections, and this is the toughest to achieve given the high amount of initial clearances and approvals required to commence operations.
8The implementation and operation of a city gas distribution network requires a host of approvals from a number of agencies, such as the National Highways Authority of India, municipal corporations, public works departments, and pollution control boards. Obtaining multiple approvals from various civic and governmental agencies and authorities calls for extensive liaison work, besides time and this will stretch the manpower resources of smaller companies.
8Further, the Right of Way (RoW) and Right of Usage (RoU) have to be acquired from private land owners which can be a long drawn process.
8Thus, there are several hurdles that the CGD players can face resulting in delays in implementing projects.
8While there have been instances in the past when companies have been granted extensions upon requests citing delays in obtaining approvals, this remains under the discretion of PNGRB.
8The Performance Bank Guarantees (PBGs), which were not in the bidding criteria in earlier rounds, were also significantly lower (up to Rs 0.5 billion) in the past as compared to some of the PBGs that have been furnished by companies in Bid-Round 4 (upto Rs 45 billion). The significant increase in PBGs submitted is on account of the changed nature of the bidding process as per which, in the case of a ‘tie’ in network/compression charges bid for by two or more companies, the company furnishing the higher PBG wins the bid.
8However, submission of a higher PBG can turn out to be counter-productive if the company does not meet the first year MWP and PNGRB decides to take action against the company by encashing the proportionate amount (one-fifth) of the PBG.
8The high probability of delays in implementation and the resulting risk of invocation of the PBG would continue to weigh on the credit profile of recent bid winners.
For more details visit indianpetroplus.com
8The first year target has been set at 15% of the total connections, and this is the toughest to achieve given the high amount of initial clearances and approvals required to commence operations.
8The implementation and operation of a city gas distribution network requires a host of approvals from a number of agencies, such as the National Highways Authority of India, municipal corporations, public works departments, and pollution control boards. Obtaining multiple approvals from various civic and governmental agencies and authorities calls for extensive liaison work, besides time and this will stretch the manpower resources of smaller companies.
8Further, the Right of Way (RoW) and Right of Usage (RoU) have to be acquired from private land owners which can be a long drawn process.
8Thus, there are several hurdles that the CGD players can face resulting in delays in implementing projects.
8While there have been instances in the past when companies have been granted extensions upon requests citing delays in obtaining approvals, this remains under the discretion of PNGRB.
8The Performance Bank Guarantees (PBGs), which were not in the bidding criteria in earlier rounds, were also significantly lower (up to Rs 0.5 billion) in the past as compared to some of the PBGs that have been furnished by companies in Bid-Round 4 (upto Rs 45 billion). The significant increase in PBGs submitted is on account of the changed nature of the bidding process as per which, in the case of a ‘tie’ in network/compression charges bid for by two or more companies, the company furnishing the higher PBG wins the bid.
8However, submission of a higher PBG can turn out to be counter-productive if the company does not meet the first year MWP and PNGRB decides to take action against the company by encashing the proportionate amount (one-fifth) of the PBG.
8The high probability of delays in implementation and the resulting risk of invocation of the PBG would continue to weigh on the credit profile of recent bid winners.
For more details visit indianpetroplus.com
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