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MGL's ambitious dreams

Arti Sharma | March 27, 2004

Mahanagar Gas has a clear choice before it. The company, which has been laying a criss-cross of lines across Mumbai, can wait till it gets assured supplies of liquefied natural gas. Or, it can go blazing full steam ahead in the knowledge that demand will one day catch up.

MGL has opted for the swift growth path. In the next 5-8 years it plans to supply natural gas to adjoining areas of greater Mumbai-Thane, Kalyan-Dombivili, Taloja, Vashi-Navi Mumbai, Mira Road-Bhayandar. "There's tremendous opportunity for us to grow since we're relatively newer than other fuel options," says A K Purwaha, managing director, MGL.

That isn't all. The company has already drawn up blueprints for an entry to Pune and Pimpri-Chinchwad on its outskirts. By the time the expansion to these areas is completed, MGL is expecting its revenue to rise four-fold. Also the gas supply will double from the current 1.5 million standard cubic metres per day.

MGL has, over the last few years, established itself firmly as a part of the Mumbai landscape. It supplies piped natural gas to over 195,000 homes, 595 commercial and industrial establishments and compressed natural gas to more than 100,000 vehicles in the megapolis.

Four months back, the company instituted a demand assessment exercise through research firm Indian Market Research Bureau in Thane district and adjoining areas and found that there was opportunity to extend the pipelines to those areas as well.

"We're already present as far as Dahisar in the west and Mulund in the central suburbs, we only have to extend the pipeline onwards," says Purwaha.

MGL has altered its strategies for growth over the years. When, it was started in 1995, the plan was only to cover Mumbai in order to help reduce pollution levels.

There was, however, a provision that the company could extend to adjoining areas and other cities in the state as well. In the last eight years, the company has been concentrating on greater Mumbai alone.

"Our growth depends largely on the supply of gas, so we plan to grow in line with GAIL's plans to connect Dahej with Uran," says Purwaha.

MGL will need about Rs 480 crore (Rs 4.8 billion) in the next eight years to turn its pipedreams into reality. It plans to raise the money from its customer base (through the installation charges), internal resources and project finance.

Currently, unlike it's Gujarat counterpart, the Rs 709-crore (Rs 7.09 billion) Gujarat Gas Company, MGL receives its entire supply of natural gas from Gail. But it is now also negotiating with Petronet LNG and Shell (which is building its LNG import terminal at Hazira in Gujarat) for additional supplies of 1.5 million cubic metres per day.

"If there is supply of natural gas in the area we can easily expand," says Purwaha. Gail's national gas grid project will be completed in phases and the first phase connecting Dahej to Hazira in Gujarat should be complete by 2005.

After that the transmission line will continue to Uran in Maharashtra and it is from this main Gail line that Purwaha and team are hoping to realise their expansion plans. "It takes time to set up a network, we want to be there as soon as the supply begins," he says.

When gas supplies become available Purwaha will also look at other cities like Nashik. It's trying to strike a deal with Bharat Petroleum and Gail in Pune (the two companies have a licence for a joint venture to supply gas in the city).

After Mumbai, Purwaha reckons it should be relatively easy to move outside the city. "Mumbai has been full of challenges that we've had to overcome, we expect it to be easier in the adjoining areas since the utilities will be less congested," he says.

MGL has only managed to touch a tip of the metropolis' population of an estimated 15 million people. Still from 53,000 domestic connections in 2001, today PNG reaches nearly 200,000 consumers accounting for 10 per cent of total revenue.

Similarly, three years ago there were around 20 CNG stations today there are 72 which means a total of 340 dispensing points in the city. CNG today accounts for 55 per cent of total revenue compared to 43 per cent in 2000-01.

Still, Mumbai did have problems that were tough to surmount. Says Purwaha, "There are several things to consider -- the time one gets to work, the permissions and such." Due to the long monsoons, MGL gets only six months to lay pipelines and permissions to dig in areas take time.

MGL also found that 12 per cent of the city's population lived in rental accommodation, which was an impediment to the growth of PNG customers because landlords weren't willing to invest in getting a piped gas connection.

Also the extra Rs 5,000 for the installation was another hindrance. "Growth will be slow because of the network and people's perceptions about the fuel need to be changed," says an industry observer.

Apart from the expansion to other areas and cities, MGL is also looking at improving its presence in Mumbai. Each year, MGL is adding about 50,000 domestic connections. Purwaha is looking at boosting this.

Presentations are being made to housing societies about the advantages of piped gas in terms of usage and pricing. It is estimated to be 15 per cent cheaper than LNG.

MGL has tied up with the city's a top real estate developers like the Hiranandanis and the Lokhandwalas to include piped gas in the new projects and societies that are coming up.

The major growth, Purwaha estimates, will come from CNG due to the Supreme Court's decisions regarding older vehicles and pollution norms. MGL estimates that every day about 100 odd autorickshaws are converting to CNG.

Out of the 72 outlets in Mumbai, MGL today owns and runs seven. In a few months, the Maharashtra government will be handing over nine plots of land exclusively for MGL to cater to the transport sector.

Purwaha, envisages that the 16 company owned petrol pumps will offer value-added services like any other petrol pump specifically catering to the transport sector. By June end, he plans to take the total number of CNG outlets to 100 and by the year-end to 130.

MGL is even getting offers for work abroad. But it has its hand full at the moment. The Abu Dhabi Government has approached it for a consultancy project for replicating a similar pipeline in the city.

Says Purwaha: "Presently, we don't have extra resources to devote exclusively to the Abu Dhabi project, so it's been put on the back burner. But we have every intention of cashing in on the opportunity."

MGL isn't the only gas company that is looking at fast growth. Gujarat Gas is also moving to cities like Bharuch, Surat, Jhagadia and Ankleshwar. About 92 per cent of its turnover comes from the industrial sector with the remaining from the domestic sector.

Says B S Shantharaju, MD, GGCL, "We are looking at the industrial belt of Valsad district which includes Vapi which is a prime industrial area as well looking at CNG outlets." Also, there's Indraprastha Gas, which is moving rapidly in Delhi and looking at outlying suburbs of the city.

For Purwaha, who monitors the progress of sale of CNG from the outlet in the compound of MGL's corporate office in Bandra Kurla Complex on a daily basis, these are exciting times.

"We've only just started, soon a majority of people will be using natural gas. There's nothing stopping any of us from growing," he says.

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