Mahanagar Gas: On a High Growth Path

An Interview with Mr. P.K. Gupta, CMD, Mahanagar Gas
What has changed for Mahanagar Gas in the last couple of years and how will it impact the company’s future?
In last couple of years a number of MGL’s constraints have thankfully vanished putting the company on an extremely high growth path. Gas availability, which was the biggest worry for us, has eased with RIL’s KG basin gas becoming available. Lack of regulatory framework was another problem, which was squarely addressed as the Petroleum and Natural Gas Regulatory Board framed rules for city gas distribution (CGD). The third key hurdle for us was setting up CNG stations in Mumbai where the real estate prices are so high. For this we have now tied up with BEST to set up CNG stations at their 24 depots. So far 8 such stations have commenced to be followed by another 12 by March 2011. All these things mean that MGL is ready to take a quantum jump in next 4-5 years. It took us 15 years to reach 2 MMSCMD, but we plan to go beyond 4 MMSCMD in next 4 years. This will make us one of the world’s largest metro-focused CGD business.
Which areas are you operating in? Where will you be in next few years?
We are now authorized to operate CGD business in entire Mumbai, entire Navi Mumbai, Thane upto Mira Road, Bhayandar and upto Dombivli, Kalyan, Ambarnath, Badlapur, Ulhasnagar and Bhivandi. This is an extremely highpotential area housing around 2 crore people.
With no constraint of gas or financing, we are growing as fast as we can by focusing on intensive as well extensive growth. We have already commenced operations in Navi Mumbai with 4 CNG stations and increasing number of piped gas households in Ghansoli, Airoli, Koparkhairane, Vashi areas in December 2009. In Thane we are available in more than 80% area including Meera Road, Bhayandar. In virgin areas such as Panvel, Taloja, Kharghar, Kalyan Dombivli, Ambarnath we have started rolling out infrastructure and the actual sales will start by March 2011.
Have you tied up for the gas required for these expansions?
Yes. Today we have contracted gas, which will suffice our next two years of growth. We have 2 MMSCMD of APM gas allocation. With RIL we have agreement for 0.37 MMSCMD of KG basin gas. We have also contracted 0.38 MMSCMD with Gail from ONGC’s C-series gas finds besides importing around 0.12 MMSCMD of spot LNG. Thus we have contracted nearly 2.85 MMSCMD gas as against our present sales of 1.85.
What are your capex plans for next five years?
In view of the high-speed growth that we are targeting for next few years, we will be investing close to Rs 300 crore annually in next five years funded through a mix of debt and internal accruals. CGD is actually a ramp-up business. You build the pipeline, the necessary infrastructure in a particular locality and continue to increase its utilization over years. Typically 10-12 years are needed to reach a saturation point in an area. However, not so in our case as our growth so far was severally constrained. We will be setting up 20 CNG stations and adding atleast 60,000 piped gas connections every year. Today we have laid 3000 km of pipelines in Mumbai and in next 5 years it will go on to 5500 km.