FORMING PART OF THE BOARDS REPORT
FOR THE YEAR ENDED ON 31 MARCH, 2023
A. INDUSTRY OVERVIEW
The year 2022 was the year when the global economies had the chance to assess the
impact of COVID-19 pandemic. However, at a time when many nations were still facing
economic slowdown, a geopolitical crisis that begin early in 2022 did not really make
matters better.
Global growth slowed in 2022 to 3.2%, well below expectations at the start of the
year.1 Trade volume growth in 2022 was slower than expected at 2.7% following a fourth
quarter slump.2 However, some positives since the beginning of 2023, point to a near-term
improvement in growth prospects in some economies.
As per the IMF data3 , India recovered signicantly from -5.8 per cent GDP growth in
2020 to 9.1 per cent in 2021 and 6.8 per cent in 2022 with projected growth rate of 5.9
per cent in 2023. The Indian economy has proven to be remarkably resilient in the face of
the deteriorating global situation due to the strong macroeconomic fundamentals that place
it well ahead of other emerging market economies.
Global gas markets moved towards a gradual rebalancing over the 2022/23 heating season,
following the supply shock sparked by geopolitical crises since February 2022. The latest
estimates indicate that global gas consumption fell by 1.5% in 2022 similar to the drop
experienced in 2020 following the first wave of Covid-19 lockdowns.
Figure 1
Change in global natural gas demand per calendar year, 2020-2023 As can be seen from
the Figure 1 above, there has been a shift in gas demand since 2021 and in 2022-23 the
decline in natural gas demand depressed storage withdrawals in Europe and the United
States over the winter season. Storage sites closed the heating season with inventory
levels standing well above their 5-year average.
Gas and LNG spot prices in 2022 witnessed unprecedented highs and recorded extreme
volatility. Such movements in global prices was primarily led by escalating geopolitical
tensions, growing concerns for the security of gas supply, particularly in Europe and the
tightening of the global LNG market.
Such volatility in LNG prices, led to Indian LNG imports falling by ~14% y-o-y (85
MMSCMD v/s 73 MMSCMD) while the domestic production went up marginally by 2% y-o-y (90.8
MMSCMD v/s 92.2 MMSCMD).
Figure 2: Natural Gas in India -ough demand from CGD segment remained almost at past
years levels, the Fertilizer sector registered a growth, increasing the share of
Fertilizers from 29% in FY 2021-22 to 35% in FY 2022-23 in total sectoral consumption.
Apart from CGD and Fertilizers, high prices squeezed gas demand for power generation,
rening & petrochemicals sector in particular.
However, since the beginning of 2023, gas prices have moderated and are expected to
soften amid milder-than-expected winters in Europe, and muted demand in China, according
to analysts. -this shall help give a boost to gas demand in price sensitive sectors in
India.
A comparatively resilient economy coupled with the Central Governments push for
cleaner fuels shall provide a push to Indias gas demand. In February 2023, Indian Prime
Minister Shri Narendra Modi while inaugurating India Energy Week (IEW) 2023 in Bengaluru
informed that the government is working on mission mode to increase the consumption of
natural gas in Indias energy mix from 6% to 15% by 2030 where all the needed
infrastructure will be provided by ‘One Nation One Grid.
He further added that the terminal regasication capacity of 21 MMTPA has doubled in
2022 while efforts are being made to increase it even more. He also added that the number
of CGDs in the country has gone up 9 times and the number of CNG stations has gone up to
5000 from 900 in 2014. The Prime Minister also touched upon the gas pipeline network which
has increased to 22,000 kilometres from 14,000 in 2014 and pointed out that the network
will expand to 35,000 kilometres in the next 4-5 years.
Quoting International Energy Association, the Prime Minister remarked that Indias
energy demands will be highest in the present decade which presents an opportunity for the
investors and stakeholders of the energy sector. He informed that Indias share in the
global oil demand is 5% which is expected to rise to 11%, whereas the gas demand of India
is expected to rise up to 500%. He underlined that new opportunities for investment and
collaboration are being created by the expanding energy sector of India.
With the thrust for increasing the usage of natural gas in Indias energy mix, your
Company is committed towards ensuring availability of the same on an uninterrupted basis
through its Statewide Gas grid and shall work towards offering solutions to promote and
facilitate usage of clean energy as well as to profitect the environment.
B. REGULATORY FRAMEWORK
The Petroleum and Natural Gas Regulatory Board Act (PNGRB Act) mandates the Board,
inter alia, to regulate downstream oil gas sector with view to profitect interests of
consumers/ entities also to promote competitive markets. -us, PNGRB is required to play a
proactive role in development of fair trade competitive markets in India.
PNGRB took major initiatives in the year which include the amendments announced in
November 2022 for inter alia, (a) more relaxation in treatment of capacity ramp up (b)
allowance of system use gas costs (c) prospective applicability of new tax rates and (d)
implementation of unied tari . Also, as decided, with effect from April 2023 it introduced
implementation of Unied Tari - a much awaited reform in natural gas sector. PNGRB
introduced implementation of Unied Tari in order to achieve the objective of economic
development of all regions of the country as this tari mechanism will help India to
achieve the ‘One Nation One Grid One Tari model & also propel the gas markets
in distant areas.
Your Company played a pivotal role in the discussions around Unied Tari in India
including as a part of Settlement Committee & Industry Committee formed by PNGRB for
implementation of Unied Tari by providing key inputs to arrive at amicable resolution of
critical issues like settlement mechanism.
With commissioning of newer interconnected pipelines, the national gas grid will keep
expanding for Unied tari and PNGRB along with the members of the Settlement Committee will
have to work towards making necessary changes to the mechanisms developed.
There are other challenges, including those related to IT infrastructure to be
developed for Unied Tari and hence, for a sustained and stable operationalization of
Unieed Tari , PNGRB is working towards providing support to industry players.
With increased impetus to usage of natural gas and transportation of the same across
our nation through pipelines, PNGRB will continue to play an important role in the
Industry by bringing in more conducive policy regime and regulations which incentivize
investments for further development of gas market.
C. OPPORTUNITIES AND CHALLENGES
Your Company has reached majority of the remote areas in the State of Gujarat through
its Statewide Gas Grid of 2704 Kms. Your Company has achieved / is in the process of
achieving connectivity with all major gas sources in the State, including existing and
upcoming LNG receiving terminals in Gujarat like the greeneeld projects of SLPL at
Jafrabad and HP LNG at Chhara.
Your Company believes that with the advent of additional domestic gas volumes from the
elds across Eastern coast of India as well through LNG receiving terminals on the Western
coast, utilization of pipeline networks shall improve. Moreover, under the Unied Tari
regime, customers at the farthest end of the network will also be incentivized to switch
to natural gas.
Gujarat as one of Indias highly industrialized states shall continue to attract
investments across Sectors. There are also very preliminary discussions around development
of gas elds on the Western most coast of Gujarat and these developments shall further
encourage industrialization in farther areas. Increasing industrial activity and
development shall provide ample growth opportunities to your Company to cater to energy
requirements.
Growth in pipeline network of subsidiaries of your Company also provide an impetus for
gas to o w to other States and utilization of your Companys statewide gas grid shall be
required. And in the Unied Tari regime, the concern of additive tari s has also been
addressed thereby supporting growth of gas based economy across India.
Your Company signed up new contracts for facilitating gas transmission from sources in
Gujarat to units / CGD GAs across Gujarat, Rajasthan and Haryana, namely- Dahej, Rohtak,
Jaipur, Haryana, Pali & Sikar.
Further, growth of CGD networks of subsidiaries in more cities, industrial clusters and
through development of CNG stations shall also lead to better utilization of your
Companys network as such captive demand shall provide a stable growth avenue.
D. OPERATIONS & FUTURE OUTLOOK
Gujarat has always been at the forefront of industrial activity and keeping up with its
pro-activeness for generating opportunities, Government of Gujarat in October 2022
announced the “The Aatmanirbhar Gujarat Schemes for Assistance to Industries
Scheme”.
Industry investors and the state government signed MoUs in various sectors including
manufacturing, chemicals & agrochemicals, pharmaceuticals & farm equipment,
hydrogen, electric autorickshaws and these MoUs will result in a potential investment of
9852 crores in the state along with 10,851 proposed employment opportunities .
To promote industrial activities across the country, Indian Railways has commissioned
1,724 kms out of 2,843 kms of Dedicated Freight Corridor Corporation of India Ltd (DFCCIL)
till February 07, 2023. The freight corridor will bring down the logistical cost and will
boost the development of new industrial hubs and townships .
It may be noted that the Dholera Special Investment Region (SIR) is about 1.5 hours
away from DFCCIL and these projects are also about to bring in increased industrial
activity in the State. Moreover, there are news reports of a manufacturing facility for
semiconductor & display coming up at Dholera SIR. -this will create a major impact to
boost the economy. A huge ecosystem of ancillary industries will be created which will
benefit MSMEs and increase the gas demand.
Indian gas markets are set to witness increased availability of gas in 2023-24. By
early next year, it is expected that total gas from RIL-BP elds in KG Basin shall reach
about 30 MMSCMD, while additional volumes from ONGCs development on Eastern coasts is
also expected to arrive in the markets by end of 2023. With softening of LNG prices, it is
expected that utilization of existing and upcoming LNG receiving terminals in India shall
also improve (vis-a-vis 2022-23) leading to higher capacity utilization of gas
transmission networks of all major entities, including your Company.
All these factors are set to improve the utilization of your Companys statewide gas
grid and provide a positive future outlook for your Company. As on December 31, 2022 your
Company along with its Subsidiaries and Associates, owns and operates 21% of total
operational gas pipeline network (in terms of length) in India. Accordingly, the critical
role your Companys network plays in the Indian gas market needs to be emphasized.
Moreover, gas demand on CGD networks and cross country networks of your Companys
Subsidiaries and Associates shall continue to act as a major pillar to the growth of your
Companys business.
GSPLs business of providing services of LNG transportation through LNG truckloads saw
substantial growth since its commencement in 2021-22. GSPL now also provides the services
of transmission of LNG through trucks to far away regions in Kutch and North Gujarat.
The Gas market in India will continue to expand with the development of newer CGD
areas, thrust for usage of natural gas vis-a-vis other fuels in view of recognition of
natural gas as a cleaner fossil fuel and improvement in availability of gas through
domestic and import sources.
Changes brought in to the domestic gas pricing by the recommendations of Report of the
Parikh Committee for Natural Gas Pricing Reforms is expected to bring in stability to gas
prices for CNG/Domestic-PNG customers. -this would result in growth in CNG/D-PNG volumes
for CGD sector. The same shall be helpful for GSPC Group. We believe there is adequate
support to long-term gas demand and the same shall benefit the growth prospects of your
Company.
Lastly, your Company is committed to sustainable growth. ESG (Environmental, Social and
Governance) is at the core of GSPLs operational strategy. GSPL continues to integrate
responsible and sustainable business practices into its operations.
Performance highlights of Subsidiary, Associate & Joint Venture Companies: GSPL
India Gasnet Limited (GIGL) & GSPL India Transco Limited (GITL):
GSPL India Gasnet Ltd. (GIGL), achieved the rare feat of implementing Indias largest
bid out pipeline in spite of the many hurdles it faced, including gas availability, ROU
issues, COVID 19 related restrictions / Lockdowns and agitations in several northern
districts against farm bills.
GIGL has successfully commissioned ~865 kms (out of 940 kms) of MBPL Phase II pipeline
project. However, works in Punjab (approx. 2 kms of 30” Mainline and approx. 45 kms
of spur lines) are adversely affected due to continuous agitation / profitests by farmers
with support of Kisan unions since October, 2020 for want of unreasonably higher
compensation. Works in affected patches of mainline are being taken up with support of
Bhatinda
District administration to complete balance works at the earliest. MBPL is a very
critical project as it connects demand centres in North and Northwestern region with the
existing and upcoming LNG receiving terminals in Gujarat and through MBPL Pipeline Network
gas shall reach these customers. GIGL now operates around 1254 kms pipeline. GIGL has
commenced gas transmission to Rohtak, Jind & Sonipat, Jaipur, Sikar & Jhunjhunun,
Ajmer and Sirsa Districts. The Company transported 1242.26 MMSCM of natural gas during the
year, a drop of ~7% over last years transportation volume of 1328.56 MMSCM in view of
subdued gas demand in the country in the year.
In GITL, initial section of 365 Kms Pipeline and associated facilities from
Kunchanapalle Dispatch Terminal, Andhra Pradesh to Ramagundam Fertilizers & Chemicals
Limiteds Plant at Ramagundam, Telangana is in operations since the November 2019. GITL
transported 586 MMSCM of gas in FY 2022-23 registering signicant growth of over 32% over
previous year volumes (444 MMSCM).
Gujarat Gas Limited:
Gujarat Gas Limited (GGL) being Indias largest city gas distribution player with
presence spread across 44 Districts in the State of Gujarat, Punjab, Rajasthan, Haryana,
Madhya Pradesh, Maharashtra & Union Territory of Dadra and Nagar Haveli is
distributing PNG to various industrial, commercial and domestic residential customers
& CNG to transport segment customers through CNG lling stations.
Gujarat Gas Limited has been continuously growing and expanding its horizon by
venturing into new geographical areas and is committed to reach every possible natural gas
users across its licensed expanse of around 1,75,600 square kilometers through its ever
growing pipeline network spread across 44 Districts. Gujarat Gas Limited has aggressively
rolled out the expansion plans to develop networks to tap the unexplored CGD potential in
new geographies within its operational areas. GGL now has total 27 CGD licenses and 1
pipeline license and operates in 44 districts encompassing six states and one Union
territory.
Gujarat Gas Limited is supplying natural gas to nearly 19 Lakh residential, over 14,390
commercial and non-commercial segments including NDEC and over 4,365 industrial customers
as on March 31, 2023.
Gujarat Gas Limited also supplies natural gas in the form of Compressed Natural Gas
(CNG) through 808 CNG stations catering to the automotive sector in the operational areas.
GGL has Implemented Indias 1 Pilot Project as a CGD business for Green Hydrogen blending
with PNG Domestic supplies at NTPC Kawas Township, GGLs Surat & Hazira GA has
successfully completed taking in 5% blended Hydrogen in DPNG network with supply to 150+
numbers of households.
Gujarat Gas adjudged as the ‘Star PSU of the Year at The Economic Times Energy
Leadership Awards 2022.
Your Company has a total shareholding of 54.17% in Gujarat Gas Limited as on 31 March,
2023.
During the year ending 31 March 2023, Gujarat Gas Limited contributed to approx 24% of
total transmission revenues of your Company.
Sabarmati Gas Limited:
Sabarmati Gas Limited (SGL) is engaged in the business of development of City Gas
Distribution districts of Gandhinagar, Mehsana and erstwhile Sabarkantha (now comprising
of Sabarkantha and Aravalli) and Patan. SGL was granted authorization under PNGRB bidding
round 6 for expanding CGD network across Patan District. During Financial year 2022-23,
SGL has developed 3 CNG stations and connected 22002 No. of Domestic customers, 24
Industrial customers and 71 commercial customers. SGL has a network of 491 Kms of steel
pipeline and 6,267 Kms of MDPE pipeline and customer base of 269,332 domestic customers,
379 industrial customers and 1032 commercial customers as well as 161 CNG stations as on
31 March, 2023.
Your Company has a total shareholding of 27.47% in Sabarmati Gas Limited as on 31
March, 2023.
During the year ending 31 March 2023, Sabarmati Gas Limited contributed to approx 4% of
total transmission revenues of your Company.
E. PERFORMANCE PROFILE
The Company continues to expand its gas grid to reach new markets and connect to new
customers and new supply sources.The infrastructure developed by the Company enabled the o
w of LNG and domestic gas from various sources, including gas from Rajasthan elds, to
reach various regions of Gujarat. The Company has managed with a lean manpower strength on
account of its well thought out strategy of developing major pipeline projects on EPC
(Engineering, Procurement and Construction) Model.
The Company transported 9253 MMSCM of natural gas during the year, a drop of ~26% over
last years volumes transportation of 12369 MMSCM. The drop is mainly on account of lower
volumes due to high gas prices.
Income from transportation of gas for the year was 1,708.87 Crore as compared to
1,985.37 Crore for previous year.
Profit Before Tax (PBT) for the year is 1,228.55 Crore as compared to 1,274.83
Crore in the previous year.
During the year, the Net Worth of the Company has increased from 8,442.91 Crore to
9,273.18 Crore and Gross Block of Assets increased from 4,633.94 Crore to 4,656.56
Crore.
During the year, Company has repaid debt in full and has become zero-debt Company
during the year.
Wind Power Project:
Your Company believes that renewable energy sources can offer enormous economic, social
and environmental benefits and India has the highest potential for effective use of the
renewable energy sources like wind power. Your Company owns and operates Wind Power
Project of 52.5 MW at Maliya Miyana, Rajkot and Gorsar & Adodar, Porbandar in the
State of Gujarat.
The Company has generated 8,90,87,531 units of power from the same which resulted in
the revenue of approx Rs. 31.38 Crores in the year.
F. KEY FINANCIAL RATIOS:
1. Companys Return on networth for FY 2022-23 is 10.67% vis-a-vis 12.63% for FY
2021-22. The change is due to marginal decrease in Profit and increase in Net-worth
compared to previous Financial Year.
2. The net profit margin is 54% in current year as compared to 48% for FY 2021-22.
3. Interest Coverage Ratio for the year was 263.48 compared to 41.73 of previous
Financial Year. The change is due to low interest expenses in current financial year
because of full repayment of Debt during the year.
4. Debt Equity Ratio was at Nil as compared to 0.01 of previous Financial Year due to
repayment of outstanding loan in full during current financial year.
5. Current Ratio as at 31 March, 2023 is 4.83 vis-a-vis 1.25 as at 31 March, 2022. The
change is due to increase in surplus fund and repayment of outstanding loan during the
current financial year.
6. Debt Service Coverage Ratio for the year was 12.68 compared to 1.05 of previous
Financial Year. The change is due to reduction in outstanding loan during start of year.
G. RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS
Risk Management:
Your Company has a comprehensive Risk Management System which identies and documents
business risks as well as provides for appropriate controls to mitigate these risks to the
best extent possible across all aspects of the Companys business.
The said Risk Management System is based on the principle by which risks are currently
managed across the Company. All functional teams address risks relevant to the assets,
projects or functions and also work towards identifying appropriate mitigation strategies.
Moreover, the Company has always focused on developing a “risk culture” that
encourages all employees to identify risks and associated opportunities and to respond to
them with effective actions.
Based on the current economic scenario affecting the Oil & Gas sector and the
prevalent regulatory regime, these are the major risks being faced by your Company:
1. A ordability and Availability of Natural Gas:
Current estimates and outlooks for natural gas availability are positive and the
likelihood of over-supply is nil. Several upstream players like RIL-BP & ONGC have
announced commercialization of their gas elds. However, for an emerging economy like
India, a ordability of natural gas vis-a-vis other fuels, especially in the wake of
growing geopolitical issues is denitely a concern. I n fact, the biggest risk for gas is
its a ordability in key demand sectors, especially owing to further supply disruptions or
extreme weather conditions. Moreover, considerable investments by upstream players in
further developing gas elds shall also need consistent support from the Centre in form of
policy / tax incentives.
2. Regulatory Risk:
The Petroleum and Natural Gas Regulatory Board (PNGRB) constituted in 2007, regulates
midstream and downstream activities in the petroleum and natural gas sector. It profitects
the interests of consumers and entities engaged in the specied activities and works
towards ensuring uninterrupted and adequate supply of petroleum, petroleum products and
natural gas in all parts of the country to promote competitive markets. Your Company
believes that it is important that all critical issues are addressed in a way that it does
not lead to market distortion in favour of a dominant player. It is expected that improved
regulatory scenario would ensure more investments in the sector.
3. Safety and Operational Risk:
The changing technologies and the natural ageing of existing facilities like Pipelines
and stations pose a risk as aged Pipelines are prone to unplanned shutdowns, increased
maintenance and operating costs. Deployment of new technologies in line with Pipeline
Integrity Management Systems and ongoing maintenance processes are the key to enhance the
reliability of operations and reduction in operating costs as well as for maximising the
life of assets while improving the safety of operating conditions. Pipeline systems
safety is also a major challenge and even minor operational issue and safety issues may
cause major safety hazards, disrupt operations at large levels, pose danger to life,
property and safety of people and penalties from statutory/regulatory bodies and
reputation of the organization may also be at stake.
Internal Control Systems:
The Company has a proper and adequate system of internal controls commensurate with its
size of operations and nature of business. The Companys internal control systems are
further supplemented by extensive programs of audits, i.e. internal audit, proprietary
audit by the Comptroller & Auditor General of India (C&AG) and statutory audit by
Statutory Auditors appointed by the C&AG. The internal control system is designed to
ensure that all nancials and other r ecords are reliable for preparing financial
statements and other data and for maintaining accountability of assets and compliance with
statutory requirements.
The Company has mapped a number of business processes on to SAP system, thereby leading
to signicant improved controls & transparency. Your Company also continues to invest
in Information Technology to support various business processes.
H. HUMAN RESOURCES
During the year, the Company did not experience any strikes or lockouts.
The increasing human capital aspirations and the competitive environment are a major
challenge for the Company in terms of attracting and retaining the human talent. In order
to remain competitive, it is imperative that Company has to hire and retain sufficient
number of skilled talent so as to strengthen its technical and project management skills.
The Company employed 256 employees as on 31 March, 2023. (Previous year: 263 employees).
The Company believes that training and personnel development is of vital importance to
create a climate where people maximize their technical skills and inner potential which
can help the Company in capitalizing the emerging business opportunities through their
involvement.
The Company has in place an attractive policy of performance linked incentive to
encourage and reward employee performance.
Forward Looking Statements:
?This Annual Report contains forward-looking statements, which may be identied by words
like will, believes, plans, expects, intends, estimates or other words of similar meaning.
All statements that address expectations or projections about the future, including but
not limited to statements about the Companys strategy for growth and market position are
forward-looking statements. Forward-looking statements are based on certain assumptions
and expectations of future events. The Company cannot guarantee that the assumptions and
expectations are accurate or will be realized. The Companys actual results, performance
or achievements could differ materially from those projected in any such forward looking
statements. The Company assumes no responsibility to amend, modify or revise any forward
looking statements, on the basis of any subsequent developments, information or event.
+91-9892691696
