City Gas Distribution To Benefit From SC Ban Of Pet Coke And Furnace Oil In NCR

The Supreme Court order to ban the use of pet coke and furnace oil in the national capital region (NCR) is likely to have a notable impact on providers of alternate fuels like natural gas over a period of time.

According to the consultancy ICRA, the industrial units using pet coke and furnace oil, post the ban would have to shift to alternate fuels such a natural gas and accordingly City Gas Distribution (CDG) entities operating in the NCR would see a significant increase in PNG (industrial) volumes over the short to medium term. However, this fuel shift would require investments, including other amendments.

“The shift will happen over time as these units will have to incur investment to switch fuels. Additionally CGD entities would have to extend their pipeline networks as many areas are not yet covered and in areas which are covered last mile connectivity would have to be provided. Nevertheless several customers operating on dual fuel mode will be able to shift completely to gas immediately. Accordingly CGD entities with a wide network and substantial industrial presence in the GAs would be key beneficiaries of the ban,” says K Ravichandran, Senior Vice-President and Group Head, Corporate Ratings, ICRA.

The shift however would come as an expensive deal for the consumers as natural gas is more expensive than furnace oil and pet coke, by almost 30 per cent.

From the industry perspective, this shift might lead to some of the small players especially those using pet coke, shifting out of NCR due to their business becoming unviable.

“Nevertheless most furnace oil based customers are expected to switch to alternate fuels, which will lead to additional PNG (industrial) volumes to the CGD entities. However, the marketers of pet coke and furnace oil will be negatively impacted by this ban, although it will not have a material impact on their profits, as they constitute a small share of overall volumes,” added the ICRA report.

Naina Sood

BW Reporters Naina Sood is a Economics graduate and has done her post graduation in International economics and Trade. She has deep interests in Indian economy and reforms