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Interview

with Rajesh Vedvyas, Managing Director, IGL

03.12.2010 / Energyboardroom

IGL was created in 1998 with the very challenging task of providing CNG and PNG to all Delhi’s consumers. You came into office in 2008 with a mandate to expand IGL’s reach even further. How successful have you been in doing so?

Since I took office, our main achievement has been to expand IGL’s infrastructure so as to meet the ever growing demand. When I entered the scene there were long queues at Delhi’s CNG stations, so I took as my first task the expansion of the infrastructure at a rather fast pace to allow consumers to conveniently refill their vehicles. In a matter of two years IGL has built about 80 CNG stations from an initial base of 160, and another 40 are under construction. Therefore, there is a huge jump in the infrastructure so as to make CNG refueling a pleasant experience to our consumers.

Regarding PNG, IGL is adding at least 50,000 connections per year. For you to have an idea, when I entered IGL the total number of connections were around 1.5 million. We have also stepped out of Delhi into all the neighboring cities. For the moment we are focusing our growth in Noida, greater Noida and Ghaziabad, markets with a great need and demand for our products.

IGL has shown a 50% growth rate in Q3 2010. What have been your main growth drivers and how did you manage to guarantee the supply of such a strong demand?

The basic growth driver is the price of CNG, which is far cheaper than any other alternative fuel. The demand is always there, but our infrastructure has to keep pace with such high demand. We really don’t need to drive the demand as this market is clearly supply driven.
In order to take advantage of that, IGL does a prospective plan of at least five years ahead. We try to estimate what will be the demand five years from now and start building the necessary infrastructure five years before. IGL’s aim is to have an unrestricted demand with the necessary infrastructure in place.

In five years IGL will be at least four times bigger in terms of turnover. Last year we had revenues of around $300 million, but our target for 2015 is to become a $1 billion company.

How difficult is it to change the mind of local consumers to switch to natural gas and to what extend you have to act as an educator?

In India price sensitivity is the one issue to take into consideration. Unless we keep that in mind, no business can succeed. If we keep on emphasizing on the environmental reasons to switch to CNG, you will probably get nowhere. It’s price, and probably some kind of forceful imposition, that helps. Like in Delhi, CNG was forced upon; otherwise diesel vehicles would not be initially willing to change to CNG. So it took quite an extra effort.

The Indian Government has applied consecutive reforms to liberalize and spread the CGD market throughout the country. Now the PNGRB has come out with a new CGD expansion plan that has raised some critics from the industry. What’s your assessment of these reforms?

It is a mixed bag as some good reforms have been brought out, but there is also a few with gaps that need to be bridged. My personal view is that, whatever PNGRB is doing, it needs to be better tuned with the industry’s need. If not, we cannot be sure that the success we achieved in Delhi and Mumbai will be replicated in other places. There will be many challenges that have to be overcome before CGD can be successfully rolled out in other cities. Delhi and Mumbai were helped by judicial interventions and further subsidized gas was made available. Now these factors will have to be considered in other cities.

Do you believe your opinions are being taken into consideration by policy-makers?

Not entirely, but to some extent yes. We continue to make our efforts in airing our views to PNGRB and the government in different fora. At the moment we have 40 Indian cities where CGD has been rolled out in the last five years, but in most of these cities, CGD business has not taken off in real sense. There are issues that need to be addressed before they try to implement CGD in 200 odd cities as the PNGRB is planning to. Even cities like Delhi and Mumbai still have unresolved issues. The PNGRB needs to act as a facilitator to resolve these problems first, before expanding the CGD business in such large scale. Unless they do that, it is doubtful that CGD business can be successfully launched in other cities.

You have highlighted the success of cities like Delhi and Mumbai in implementing a very successful CGD system. How can IGL directly help other Indian and international cities in expending the accessibility of CNG and PNG to final consumers?

In order to reach our current stage of development IGL had to overcome many challenges. We can definitely help the cities where this program is being launched through imparting knowledge based on our experience on how to avoid those issues and on how to overcome them. For instance, we can help them on making CNG acceptable to consumers, or how to make local authorities cooperate in launching these initiatives. IGL’s experience can come in handy in helping the successful launch of these operations. IGL has now 250 gas stations; we know better than anyone else how to run these operations. This is why we are currently helping other CGD businesses. They come to us for any technical problems they have, whenever they face problems and they find in IGL a partner and helper in overcoming the problems.

How important are international partnerships for such a regionally driven company such as IGL?

They are most relevant. In fact, important areas such as compressors and dispensers come from international companies whose products and technologies we are using. India is a relative new entrant in CGD, about ten years, whereas other countries such as Argentina and Italy have CGD for much longer. Almost all the CNG kits in vehicles are imported from Italy. International partnerships have facilitated the quick evolution of the CGD business in India.

What is your final message to the readers of the Oil and Gas Financial Journal about the potential of CGD in India?

Based on the IGL experience, I am sure there is a huge potential for the growth of CGD business in India. And this can only be possible with the partnership of suppliers, contractors and other international companies in this business. There is a good scope for every company to benefit from CGD in India. IGL is doing its part for Delhi’s citizens and needs to continue on its track of fast and sustainable implementation of the CGD infrastructure, and act as a trail – blazer of such business in other parts of the country.

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