The Union Ministry of Petroleum and Natural Gas has urged states and Union Territories to reduce local levies and procedural hurdles on City Gas Distribution (CGD) projects to improve the investment climate and accelerate the adoption of piped natural gas (PNG) as a cleaner alternative to LPG, particularly in the commercial sector.
In a semi-official letter written to all Chief Secretaries on Wednesday, Petroleum and Natural Gas Secretary Dr Neeraj Mittal said high right-of-way charges, road cutting fees, lease rentals and other levies imposed by local bodies are discouraging investments in CGD infrastructure.
The letter notes that the CGD segment, especially the piped natural gas business supplying households and commercial users, does not receive any direct subsidy and is therefore dependent on reasonable returns on investment.
According to the ministry, excessive charges imposed by urban local bodies and varying fees across states for road and infrastructure cutting are having a dampening effect on CGD expansion.
Dr Mittal pointed out that unreasonable taxation and charges on a nascent business could have a strangulating impact on associated economic activity, whereas rationalising these levies could lead to greater revenue buoyancy over time through increased gas usage and related economic growth.
Highlighting the gap between infrastructure creation and actual usage, the letter said that while around 12.63 crore PNG connections have been provided on paper, only about 1.6 crore are currently functional.
The ministry argued that this gap can be bridged through ease-of-doing-business reforms at the state and local levels, which would help expand the CGD customer base and eventually generate higher revenues from a larger economic base, offsetting any short-term loss from lower local taxes.
The communication also linked the proposed reforms to the current shortage of LPG supplies in the wake of the Middle East crisis.
It said oil marketing companies are presently supplying only 20 per cent of normal commercial LPG requirements to states, and a faster transition of commercial consumers such as hotels, restaurants and eateries to PNG would ease pressure on scarce LPG supplies.
In this context, the ministry proposed increasing commercial LPG allocation to 30 per cent for states that undertake specific reforms to promote PNG and CGD networks.
Under the proposal, states can earn incremental LPG allocation by implementing a set of measures. These include constituting empowered state-and district-level committees with representation from local bodies to approve CGD applications and resolve grievances, granting deemed permissions for pipeline laying applications within 24 hours through a single-window mechanism, introducing a dig-and-restore scheme that replaces restoration charges with a bank guarantee, and reducing annual rental or lease charges for CGD networks to zero.
The ministry said implementation of these reforms would be verified, after which additional gas allocations would be approved.
The letter also referred to steps taken by GAIL and its subsidiaries, which have allocated 100 per cent gas supply to the commercial PNG segment to support businesses affected by LPG curtailments, and reiterated the government's push for natural gas as a cleaner, domestically sourced fuel.
