The city gas distribution (CGD) sector offers a way to improve the availability of natural gas to the industrial, domestic and commercial segments of a region. The CGD sector which is slowly but steadily evolving at a CAGR of 8% andwill play a remarkable role in the growth of India’s economy. Currently the CGD segment constitutes 10% of the total gas consumption in India and is expected to reach a share of 20% by FY20. The supply of natural gas for CGD was around 13 mmscmd in FY11 against the demand of 15.83 mmscmd in the country. With an estimated demand of 100 mmscmd by FY20, CGD market is expected to grow by leaps and bounds.
Financing plays a crucial role in CGD projects which generally have a debt-equity ratio of 2:1. Primary factors influencing financing of a CGD project are its cost structure, ownership structure and focus areas (PNG/CNG). CGD project costs depend on the extent of the geographical area, demand composition and penetration in terms of domestic connections.