Gujarat Gas Management Discussions


The Management Discussion & Analysis is as under:


Natural Gas is the cleanest and most efficient of the fossil fuels. It is the only fossil fuel whose share of the primary energy mix is expected to grow, as it has the potential to play an important role in the worlds transition to a cleaner, more affordable and secure energy future due to its high energy content, which results in lower emissions of carbon and volatile organic compounds (VOCs) at combustion, relative to coal and oil. These characteristics of gas provide substantial environmental benefits such as improved air quality and reduced CO2 emissions.

World energy demand rebounded sharply during FY 2021-22. The strong demand growth was driven by the economic recovery that followed the previous years lockdowns. The combination of demand growth and lower-than-expected natural gas supply led to the extremely tight gas market situation that prevailed during most part of the year. The year ended with all-time high natural gas prices in the main importing markets in Europe and in Asia.

Crude Oil prices have always been at the forefront for all energy prices including Natural Gas. The crude oil prices increased drastically during the 2nd half of FY 2021-22. The Crude Oil prices crossed $100/bbl in the last quarter of the Financial Year.

Indias natural gas consumption has increased by nearly 7% in FY 2021-22 as compared to the previous year. This was led by the city gas segment (~ 24% of total natural gas consumption), where a strong recovery from previous years lockdowns and the continuing rollout of new distribution networks boosted demand. In 2022 the demand growth is expected to accelerate by nearly 8% on the back of strong GDP growth, expanding infrastructure and a supportive policy environment. However, high LNG prices could present continuing headwinds to Indias gas demand recovery in 2022.


The Government is promoting the usages of clean and green fuel, i.e. Piped Natural Gas ("PNG") and Compressed Natural Gas ("CNG") by expanding the coverage of CGD network in the country. In order to promote the natural gas usage in the country, the Government has issued guidelines for making available Domestic Gas to the CGD entities for meeting the entire requirement of CNG for transport sector and PNG for Domestic. However, owing to significant increase in demand for CNG and PNG (Domestic) categories, the Domestic Gas allocated is insufficient to meet the demand. The shortfall is being filled by sourcing RLNG at market rates. The above factors has led to significant increase in prices in CNG & PNG (Domestic) categories; however the impact on demand in these categories may be limited as prices of alternate fuels has also increased significantly.

During the year, PNGRB announced the TIth and TIA CGD Bidding Round comprising of 71 Geographical Areas covering 235 districts spread over 19 States and 2 Union Territory (UT). With completion of this CGD bidding round 96% of Indias population and 86% of Indias area spread over 600 districts in 28 States/ UTs would have access to CGD networks.

The Honourable Supreme Court vide its order dated September 28, 2021 in the matter of Adani Gas Limited (AGL) v. UOI & Ors (SLP(c) 28192-93 of 2018) had upheld the authorization awarded to your Company for the Geographical Area of Ahmedabad District (Excluding Areas Already Authorized).

Similar to any other business, the Company faces challenges in the form of stiff competition from other conventional fossil fuels due to accessibility and availability. The fuel also faces threat in the form of disparity in the tax structure compared to alternate fuels as PNG and CNG are still out of GST ambit. Notwithstanding these, your Company shall continue to focus placing environmentally clean Natural Gas to affordable markets for sustainable growth.

In addition, during the FY 2020-21, the sector regulator Petroleum and Natural Gas Regulatory Board (PNGRB) notified regulations enabling open access to CGD business in India. In January 2021 your company had challenged the said regulation and other related regulations at Honourable High Court of Delhi. Your company was able to obtain favourable interim order stating that the PNGRB shall not take any coercive actions against Your Company. The matter is presently sub-judiced. While this may have some impact on GGLs business; it shall also allow GGL to access other CGD markets too. Hence the net impact on account of the open access regulations may be minimal in the foreseeable future.

Further, due to the Covid-19 worldwide pandemic outbreak, your company has faced various challenges in executing its CGD development activity across different geographies due to which there was delay in achieving the Minimum Work Program (MWP) awarded by the PNGRB. In this regards, your company has filed Review petitions with the PNGRB seeking extension of exclusivity period and shifting of year wise MWP targets by the PNGRB on account of Force Majeure event i.e. Covid-19 pandemic.


Your Company as on date has total 27 CGD licenses and operates in 44 districts across six states and one Union territory which accounts to c. 9% of total CGD licenses and c. 6% of total areas authorised by PNGRB in India and one transportation pipeline license. Your Company has an expanse of around 1,75,700 square kilometres of licensed area under its umbrella and continues to hold the leadership position of being the largest CGD Company in terms of sales volume. Your company supplies natural gas to more than 17 lakh residential consumers, over 13,400 commercial customer and has erected / commissioned 711 CNG stations for vehicular consumers and provides clean energy solutions to over 4,300 industrial units through its wide spread operations with more than 32,800 kilometres of Natural Gas pipeline network.

Your company has achieved a moderate growth of 7% in industrial sales compared to previous year. The CNG & Commercial category volumes have increased by 52% each. The CNG and commercial category volumes have recovered during the second half of FY 2021-22. Your Company has continued its focused efforts for developing and growing PNG (Domestic) and CNG business. Your Company added more than 1,54,000 residential customers and erected / commissioned 153 new CNG stations and 2 new LNG Station during the year.


The future outlook for natural gas in India depends on the growth in demand, the evolution of the pricing regime, and the pace of gas infrastructure expansion. The demand will steadily rise with opening of the economy after the pandemic.

Your company has already adopted digitization of its critical processes and going forward also, your company shall leverage its endeavors for more digitization and aims to set benchmark in the CGD industry for complete E-Office, benefiting all the stakeholders viz. consumers, vendors, suppliers and employees.

Indias Natural Gas supply and demand outlook is changing. The Government of India (GoI) wants to make India a gas-based economy by boosting domestic production. India has set a target to raise the share of gas in its primary energy mix to 15% by 2030. To improve the share of Natural Gas and promote a gas-based and clean fuel economy, the GoI has adopted a systematic approach to focus on all aspects of the gas sector viz upstream, midstream and downstream including CGD network development.

Your Company has been continuously growing and expanding its horizon by venturing into new geographic areas and is committed to reach every possible Natural Gas user across its licensed expanse of around 1,75,700 square kilometres through its ever growing pipeline network spread across 44 districts in six states and one UT. Your Company shall continue to focus on growing the penetration in the current operating areas by increasing the PNG connections and additional CNG stations while tapping the untapped potential by expeditious rollout of distribution network in its operating Areas. With this focused endeavour Your Company shall continue its efforts in providing clean fuel solutions across all operational area to augment an energetic top-line and bottom-line in coming years.


The Brent crude oil spot price averaged $115 per barrel in March 2022, an increase of 100% as compared to April 2021. The war between Ukraine and Russia has been a key contributor in increase of Crude Oil prices during the latter part of the Financial Year.

The crude oil prices are expected to be over $100 per barrel for most part of FY 2022-23. However, this price forecast is highly uncertain and will depend on various factors including how long the war between Ukraine and Russia lasts.


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 financial and other records 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 significantly improved controls & transparency. Your Company also continues to invest in Information Technology to support various business processes and automating controls.


The stand-alone net profit after tax (Total comprehensive income) for the current financial year 2021-22 increased to Rs 1288.33 Crores from Rs 1270.72 Crores in the previous year. The Company had a healthy net cash inflows from operations of Rs. 1661.76Crores during the financial year 2021-22. During the year, the Company also prepaid loans amounting to Rs 327 Crores from internal accruals bringing down the total debt level to Rs 478 Crores at the end of financial year.

Investments were made in extension of pipeline network to reach new areas and in reinforcements and upgradation of existing network as required. Investments were also made to connect residential customers and augmenting the CNG infrastructure. Investments were also made to upgrade the IT infrastructure and integrate SAP to enhance reliability and enable scalability. Appropriate provisions have been made in the accounts wherever necessary for contingencies, bad debts and diminution in value of investments. No amount has been transferred to the General Reserve during the year.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor, including:

Particulars FY 2021-2022 FY 2020-2021 Remarks Reason for changes
Debtors Turnover 18.66 13.95 Net Credit Sales / Average Trade Receivable Increase in trade receivables is lower than increase in turnover
Inventory turnover 924.77 591.67 Cost of goods sold or sales / Average Inventory (Natural Gas) While average inventory levels have remained in line with last year, higher cost of gas has led to increased turnover ratio.
Interest Coverage Ratio 48.57 16.87 Earning for Debt Service / Interest for borrowing [Earning for Debt Service = Net Profit after taxes + Non-cash expenses/adjustment + Interest -Lease payments] Interest Coverage Ratio is improved due to reduction in borrowings cost on account of prepayments/ repayments of loans during FY 2021-22 and reduction in interest rates
Current Ratio 1.17 1.08 Current assets / Current liabilities net of customer deposit NA
Debt Equity 0.09 0.20 Total Borrowing / Total Equity Debt Equity ratio has improved due to prepayments/ repayment of Borrowings during the year and increase in total equity due to current year profits.
Operating Profit Margin (%) 12.76% 21.29% Operating income / Revenue from operations While Operating profit is at par with last year, it has reduced in %age terms, due to increase in turnover.
Net Profit Margin (%) 7.66% 12.61% PAT / Revenue from operations While Net profit is at par with last year, it has reduced in %age terms, due to increase in turnover.
Return on Net Worth 25.05% 31.97% PAT / Average net worth NA

• Previous years ratios have been reclassified wherever necessary to confirm to the current periods presentation.


In view of the pandemic relating to Coronavirus (COVID-19), the Company has considered the impact of COVID19 as evident so far in the above financial results. The Company will continue to monitor any material changes to future economic conditions which necessitate any further modifications.


Your Company employed 1034 employees as on 31st March 2022. Your Company has a focus on building capabilities and developing competencies of its employees. The Company believes that training and 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. Considering the pandemic situation, during the year, employees were facilitated for various training programs and seminars (including virtual mode) to enhance their skills/knowledge. Your Company has in place an attractive policy of performance linked incentive to encourage and reward employee performance.

There was no strike or lock-out during the year under review.