To improve the gas distribution infrastructure in the country, Oil Ministry is currently working on a new public-private-partnership (PPP) model for laying gas pipelines in the country. Finance Ministry during budget 2014-15 announced plans to double the country's gas pipeline network to 30,000 km to complete the national gas grid, mainly through the PPP model.
Oil Ministry has asked the Petroleum and Natural Gas Regulatory Board to initiate work on it. Further, the Board has already been authorised to call for bids for 9,000 km of pipeline infrastructure. PPP mechanism consists two models such as viability gap funding and tariff based funding and the board may opt for a consultant to determine which model will be suitable for the development of national gas grid.
Under the tariff-based competitive bidding, project developers bid on the basis of a pre-fixed tariff with an option to keep a portion open for cost escalation. Whereas viability gap funding is essentially a subsidy to provide support to infrastructure projects that fall short of financial viability due to inability to raise tariffs to commercial levels and their long gestation period. Meanwhile, industry is of the view that board should go with viability gap funding model for gas infrastructure sector for certain segments as a particular zone or area may not have sufficient demand to make the project economically viable for the developer.