Case Study - Marketing Management

ASIAN CASE RESEARCH JOURNAL, VOL.
20, ISSUE 1, 177–217 (2016)
ACRJ
Sabarkantha Gas Limited:
This case was prepared by
Dr. Sanjay Kumar Kar Challenges of Marketing
of Rajiv Gandhi Institute
of Petroleum Technology Natural Gas
(RGIPT), Dr. Piyush Kumar
Sinha of Indian Institute
of Management, Ahmedabad On 6 June 2012, Mr. P. K. Kudaisya — MD of Sabarkantha
and Dr. Saurabh Mishra of
RGIPT, India, as a basis for Gas Limited (SGL) took his highly talented and immensely
class discussion rather than motivated young team for a meeting out of the board-
to illustrate either an effec-
tive or ineffective handling of room. This was his first meeting in June 2012. He decided
an administrative or business to meet his multi-functional core team to review the prog-
situation. As per the request
of the company, the actual ress made so far and develop a strategic roadmap for the
identities of the company and
its employees are disguised.
next three years. The team members comprised of Mr. P. S.
Durgesh (Senior Manager Projects), Mr. S Mohaptra (Chief
Please send all corres-
pondence to Dr. Sanjay
Manager, HSE), Mr. Dipen Parmar (Head — Commercial and
Kumar Kar, Department of Marketing), Mr. K. Dattani (Senior Executive, Marketing),
Management Studies, Rajiv
Gandhi Institute of Petro- M. Sanandhya (Marketing), Mr. R. Solanki (Senior Executive,
leum Technology, N01DA- Marketing) and Mr. T. R. Ravi (Manager, Human Resource).
U.P. 201301, India. E-mail:
karsanjay1@gmail.com The team members were key decision makers in their respec-
tive fields and were ably supported by their executives. Mr.
Kudaisya took a few minutes to highlight the achievements of
SGL. After his welcome note and opening remarks, he invited
Mr. Durgesh to brief the team on the progress of different
ongoing projects. Mr. Durgesh updated the developments and
Mr. Kudaisya was happy. Several ongoing projects were near
completion and Mr. Parmar was expected to speed up the
commercial and marketing activities. Mr. Parmar was invited
to share the ongoing marketing initiatives and future strate-
gies to provide fast track growth to SGL. Parmar was excited
as ever to inform the team about the developments. On the
other hand he was very careful about the market dynamics
impacting business prospects of SGL, hence he was concerned
© 2016 by World Scientific Publishing Co. DOI: 10.1142/S0218927516500073
S0218927516500073.indd 177 30-06-16 12:02:54 PM

178 ACRJ
about the current and potential challenges of the business

environment. “We are not really concerned about competi-
tion, but about our customers,” he added. Mr. Kudaisya had
been a true believer of competition and a real fighter to win
well-thought-out battles in the market place. Truly inspiring
leaders like him believe in creating competition and winning
the same rather than avoiding. Mr. Kudaisya had been suc-
cessfully inculcating the same in the organization. During the
last couple of months one critical area bothering the commer-
cial and marketing team had been the pricing. Unavailability
of domestic gas and rising price of natural gas in the inter-
national market created pressure on the bottom line. “Bottom
line does matter, but market expansion and loyal customer
base is the need of the hour,” said Kudaisya. Rapid expansion
of customer base and retention of the same could make SGL
as one of the top natural gas marketing companies in India.
Each member of the team had shown significant commitment
to achieve the above stated goal.
NATURAL GAS MARKET IN INDIA
India’s natural gas production increased marginally by 10%

to 143 million standard cubic meter per day (MMSCMD) in
2010–11, from 130 MMSCMD in 2009–10 primarily due to
rise in production of RIL’s D6 blocks in Krishna-Godavari
(KG) basin to 55.9 MMSCMD in 2010–11 from 42 MMSCMD
in 2009–10. However, the production from KG-D6 fields was
lower than the expected level of 60–80 MMSCMD. Again the
sharp decline in the production touching 45 MMSCMD was
observed in Q2 2011–12 which generated concern among
many of the stakeholders like gas marketing entities and the
government. A recent report from ICRA indicated that KG-D6
production level might be hovering around 45 MMSCMD,
with further downside risks over the next couple of years.
According to reports in the media the gas production in
KG-D6 fields reached 32 MMSCMD in the last week of May
2012. On the demand side, despite the high potential across
various sectors, the constant demand for natural gas would
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SABARKANTHA GAS LIMITED: CHALLENGES OF MARKETING NATURAL GAS 179
be driven by adequate gas supply at reasonable and afford-

able price point, price of competing alternative fuels and
timely commissioning of pipeline network, relevant regu-
latory reforms in power sector and quick regulatory inter-
ventions by Petroleum and Natural Gas Regulatory Board
(PNGRB).
NATURAL GAS MARKET IN GUJARAT
Gujarat has many high energy consumption industrial areas

such as Jamnagar, Surat, Morbi, Vapi, Pipavav, Ankleshwar,
Mehesana, Mandali, Himatnagar, Bharuch, Dahej, Rajkot and
Mundra. These industrial areas provide very attractive market
opportunity for natural gas marketing entities. The entities
are fortunate to have operations in a state which has been
enjoying status of one of the most developed gas markets in
India. By 2012, it was the only state in India to have 2200 km
integrated natural gas grid that was operated on an open
access, and common carrier principles. The state had mul-
tiple suppliers (Exhibit 1) and buyers of natural gas. The state
boasts of having the first and the largest LNG terminal (i.e.
Dahej terminal) of the country. In fact Gujarat was the only
state to have multiple LNG terminals. One could certainly
find that the state had been very active in promoting natural
gas as a viable alternative to other petroleum products. The
state government intends to make Gujarat as a natural gas
driven economy. The state government had been showing
clear intent to move toward CNG driven transportation
economy. Especially the intra-city transportation has been
going through a visible transformation. The buses run by
the state transport and auto rickshaw and taxis operated by
private owners in major cities like Ahmedabad, Gandhinagar,
Surat, and Vadodara had been shifting to CNG. Natural gas
market in Gujarat had been growing rapidly due to avail-
ability of natural gas and well planned and executed gas
distribution network (see Map 1). Critical factors positively
impacting natural gas market developments of the state are:
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180 ACRJ
A. Gas Demand and Supply
Natural gas production in Gujarat had been showing declined

growth rate. The state had seen net production of 2879
MMSCM and 2230.24 MMSCM of natural gas in FY2001–02
and FY2010–11, respectively. During the same period net
production of the state recorded a negative CAGR of 2.79%.
During the same period, gas production in India recorded
a stable CAGR of 6.92%. India’s domestic gas produc-
tion jumped from 28.03 BCM in FY2001–02 to 51.23 billion
cubic meter (BCM) in FY2010–11. Natural gas demand had
been driven by power, fertilizer, ceramic, and other indus-
tries in Gujarat and the demand was projected to reach 122
MMSCMD by the end of FY2015 (see Table 1a). For meeting
the demand for natural gas Gujarat had been depending on
different supplier sources such as Oil and Natural Gas Corpo-
ration (ONGC), Gujarat State Petroleum Corporation (GSPC)/
Niko Resources, Cairn Energy, Petronet, Shell LNG, and
Reliance Industries (see Table 1b).
B. Gas Pricing
Historically there had been two types of gas pricing mecha-

nism followed in India. The first one being popularly known
as administered price mechanism (APM) and the second one
being non-APM or market determined price. In June 2005
price of APM gas was fixed at Rs. 3200 per thousand stan-
dard cubic meters (MSCM) at 10,000 Kcal/cubic meter and in
June 2006, the price of natural gas supplied to city gas distri-
bution projects and small consumers having allocations up to
50,000 standard cubic meter per day (SCMD) was increased to
Rs. 3840/MSCM. In May 2010, government revised and fixed
the price including the royalty of APM natural gas produced
by National Oil Companies (NOCs) at $4.2 per million British
thermal unit (mmBtu), about Rs. 7500/thousand standard
cubic meter (MSCM), until further notification. The price was
to be on Net Calorific Value (NCV) basis and to be converted
to Rs./MSCM on the basis of Reserve Bank of India reference
exchange rate. The price was excluding cess, transportation
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Table 1a. Projected Gas Demand (in MMSCMD) in Gujarat FY2009–

2015.
2009 2012 2015

Power 19 32 43
Fertilizer 10 12 12
Industry 35 49 53
City Gas Distribution 7 10 14
Total 71 103 122

Source: CRISIL Analysis.
Table 1b. Existing Natural Gas Supply Sources in Gujarat.
Suppliers Sources Volume of Supply

(in MMSCMD)
Onshore fields located near Ahmedabad
region and Ankleshwar/Surat region and
ONGC offshore (JV) fields in the Arabian Sea 20
(Western Offshore — including PMT
supplies)
GSPC/Niko Resources Hazira Gas Field 0.6
Cairn Energy CB-OS2 field in the Cambay basin 0.8
Liquefied Natural Gas (LNG) from RasGas,
Petronet LNG Ltd. 40
Qatar
Reliance Industries Ltd. KG D6 Gas –
Shell LNG Hazira (Spot LNG) 10
Total 71.4
Source: Compiled from Infraline, Petronet LNG, Shell LNG, and Kar, et al. (2012).
charges, marketing margin/service charges, and taxes. The

government was offering 40% subsidy to the customers
in North-East. The subsidy amount was to be paid to the
national oil companies (NOCs) from budget allocation. The
non-APM price was applicable to imported LNG (see Table 2)
and natural gas produced from domestic fields allocated to
companies through competitive bidding.
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182 ACRJ
Table 2. Gas Prices in India.
Producer/Source Land Fall Marketing Central Transmission Service Total

Price Margin Sales Charges Tax Price
US$/ (US$/ Tax US$/ 10.50% (US$/
MMBtu MMBtu) 2% (US$) MMBtu (US$) MMBtu)
ONGC/Oil APM
4.2 – 0.084 0.6 0.44 5.33
(including Royalty)
ONGC C-Series 5.25 0.12 0.105 0.6 0.55 6.63
(including Royalty)
PMT 5.65 0.11 0.113 0.6 0.59 7.07
Other JVS (Ravva) 3.5 0.11 0.070 0.6 0.37 4.65
R-LNG (Long Term
8.7 0.17 0.174 0.6 0.91 10.56
Contract)
Reliance KG-D6 4.2 0.14 0.084 1.8 0.44 6.67
RLNG (Spot) 16 0.17 0.320 0.6 1.68 18.77
Source: Compiled from different sources.
Price of LNG imported under term (short-term or long-

term) contracts was governed by the gas sales and purchase
agreement (GSPA) between the LNG seller and the buyer.
Due to unavailability of LNG through long-term contracts
the buyers were forced to purchase spot cargoes at prevailing
market price. By December 2011, Spot LNG prices at West
Coast of India reached $14/mmBtu from $10/mmBtu at the
beginning of 2011. The Spot LNG price for July and August,
2012 delivery to Japan was touching $18 and $18.25, respec-
tively (Reuters, 2012). It is evident that Spot LNG price was
about three times higher than the domestic gas price fixed
by the government. According to Dr. A. K. Balyan, CEO &
MD, Petronet LNG Ltd., “Spot LNG price likely to soften in
2012” (CNBC, 2011). However, with long-term contract LNG
prices at $8.7–9.5/mmBtu and high spot market price around
$14–18/mmbtu, the transport and domestic segment con-
sumers might find uneconomical for switching to natural gas
from the existing fuel.
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C. Tax Structure
Government levied 5% custom duty on regasified LNG

(R-LNG). Compressed Natural Gas (CNG) customers in
Gujarat were paying 14.43% excise duty, 15% value added
tax (VAT), 2% education cess and 1% higher education cess.
Some of the industries like ceramic, and insulator manufac-
turers were getting 11% VAT reimbursement from the state
government. Central government levied 5% custom duty
on naphtha for nonfertilizer and for fertilizer there was no
custom duty. On the other hand, custom duty on LPG was
nil. High taxation structure on gas and alternate fuel was
found to influence purchasing decision of customers and
industry preparedness for adopting such a fuel. SGL was
selling natural gas across all three segments such as indus-
trial, domestic and transport segments in Gandhinagar, Mehe-
sana and Sabarkantha districts. Custom duty on R-LNG was
making the gas more costly for the customer especially when
the spot price of LNG hovering around $14–18/mmBtu.
D. Wider Use of Natural Gas
Natural gas could find wide variety of end users ranging

from power sector to domestic consumers (see Table 3).
Natural gas had been found to be economical compared
to other existing fuels like FO, petrol, LDO (diesel), naphtha
and liquefied petroleum gas (LPG) and expanded form of FO
(furnace oil) (see Table 4).
In addition to the economic aspects, natural gas was
considered as a cleaner fuel. The industrial, domestic, and
commercial PNG customers were deriving important benefits
such as uninterrupted supply, no handling charges and zero
storage space. The Piped Natural Gas (PNG) customers did
enjoy a credit period (considering the billing cycle) ranging
between 15–30 days depending on the type of customers. The
users were charged only for the amount of PNG used and no
pilferage was possible with PNG as the billing was done on
the basis of meter reading taken from the meter installed in
the premises of the customer. A unique feature of PNG was
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184 ACRJ
Table 3. End Users of Natural Gas.
End User Carbon Purpose Substitute

Molecule
Power C1 Used as a fuel in thermal Coal
power generation
Cement C1 Used as a fuel in gas fired Coal, LPG, Naphtha, Furnace
boilers Oil (FO) and High Speed Diesel
(HSD)
Ceramic C1 Industrial fuel for spray Diesel, Coal, Furnace Oil,
dryers and is used for Naphtha,C-Nine and LPG etc.
combustion in kiln.
City Gas C1 Used as a fuel for heating, LPG and Electricity
cooking and cooling
(domestic and commercial
use)
Transport Sector C1 Used in the form of CNG Diesel, Petrol, and Auto LPG
(compressed natural gas)
as a transportation fuel
Fertilizers C1 Natural gas is the Naphtha and Fuel Oil
principal feedstock for the
manufacturing of ammonia,
an intermediate product
primarily used in the
manufacture of nitrogenous
fertilizers like urea, nitric
acid, ammonium nitrate and
ammonium sulfate
Petrochemicals C2/C3 Specific fractions in Naphtha and Propane Gas
feedstock are used for
manufacture of ethylene
and propylene
LPG C3/C4 Specific fractions are Crude Oil
extracted to form LPG
Methanol C1 Feedstock Naphtha and Biomass
Source: Kar et al. (2012).
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Table 4. Price Comparison and Economics of Alternative Fuels.
Customer Fuel Unit of Gross Price Vat % Vat Total Price

Segment Measure Calorific Including (Rs/Unit) Price (Rs/1000
(U.O.M) Value Excise Duty (Rs/Unit) kcal)
(Kcal/Unit) (Rs/Unit)
LPG Kg 11,500 29.40 0 0 29.40 2.56
Domestic
Natural Gas S.C.M 9,900 18.18 15% 2.73 20.91 2.11
LPG Kg 11,500 66.80 4% 2.67 69.47 6.04
Commercial
Natural Gas S.C.M 9,900 37.00 15% 5.55 42.55 4.30
FO Ltr. 10,300 49.41 4% 1.98 51.39 4.99
LDO Ltr. 10,530 60.35 15% 9.05 69.40 6.59
Coal
Industrial (Australian Kg 5,800 7.00 4% 0.28 7.28 1.26
Imported)
Naphtha Ltr. 11,200 65.02 18.5% 12.03 77.05 6.88

Natural Gas SCM 9,000 30.70 15% 4.61 35.31 3.92
Auto LPG Ltr. 6,440 39.76 15% 5.96 45.72 7.10
Petrol (MS) Ltr. 10,800 59.15 23% 13.60 72.75 6.74

Transport
Diesel (HSD) Ltr. 10,600 38.22 21% 8.03 46.25 4.36
CNG Kg 12,150 43.65 15% 6.55 50.20 4.13
The above fuel prices are indicative and were applicable in Gujarat on or before 6 June 2012.
Source: Compiled from multiple sources.
that the user paid only after consumption of the gas. The gov-
ernment of Gujarat had been encouraging natural gas use
in power, fertilizer, domestic, transport and industrial seg-
ments. Use of natural gas in fertilizer, transport and domestic
segment could reduce subsidy burden on government. As
on 1 April 2011 the state had 6.375 million domestic LPG
customers. As on 1 February 2012 government of India was
giving subsidy of Rs. 400.00 ($8) per LPG cylinder (14.2 kg) to
domestic customers. Every household converted to PNG from
LPG could reduce annual subsidy burden of Rs. 4800.00 ($96)
from the government expenditure.
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186 ACRJ
E. Regulatory Environment
Different sectors of Indian economy had progressively moved

towards market-driven regimes since economic liberalization
in 1991. Critical sectors like electricity, telecoms, insurance,
and capital markets had been under independent regulatory
body. Petroleum and Natural Gas sector undergoing transfor-
mation needed an independent regulatory body. Government
of India through an act of parliament known as Petroleum
and Natural Gas Regulatory Board (PNGRB) Act, 2006 set up
the regulatory body and notified about the same on 1.10.2007
petroleum/natural gas pipelines and city gas distribution
networks, being an integral part of energy infrastructure of
economy, needed a robust regulatory framework in order
to curb monopolistic tendencies besides ensuring an effi-
cient utilization of infrastructure, fair price to consumers and
adequate return to owners and producers. The regulator is
a bridge between the state ownership and market (Mahal-
ingam, 2011). According to the mentioned Act the regulatory
body had been set up with objectives to regulate refining,
processing, storage, transportation, distribution, marketing
and sale of petroleum, petroleum products and natural gas
(excluding production of crude oil) and natural gas. This was
done to protect interests of consumers and entities engaged in
specified activities relating to petroleum, petroleum products
and natural gas and to ensure uninterrupted and adequate
supply of petroleum, petroleum products and natural gas in
all parts of country and to promote competitive markets and
for matters connected therewith or incidental thereto. The
Act, inter alia, provides for legal framework for downstream
oil and gas sector regulation, development of petroleum/
natural gas pipelines and city or local natural gas distribu-
tion networks. Regulatory reforms do permit and encourage
market forces to be competitive and shape up an efficient
industry structure, said Mahalingam (2011).
The key task of PNGRB includes protection of con-
sumer interest by fostering fair trade and competition
amongst entities by creating environment for level playing
field, registering entities to elicit serious participation from
industry in all segments of downstream energy value chain,
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authorize entities and to regulate by regulations the access to

common or contract carriera. PNGRB has jurisdiction to adju-
dicate upon and decide any dispute or matter, to receive com-
plaints and conduct inquiry and investigation, to pass orders
and directions as it deems fit while deciding a complaint. The
key tasks of PNGRB are included in Annex 1.
PNGRB had been facilitating much-needed investments
in downstream oil and gas sector in order to ensure sustain-
able growth and development of the sector. Also, it had been
promoting efficiency by enhancing productive and fair com-
petition. It had been trying to ensure fair play in access to
natural monopoly assets like pipeline infrastructure. PNGRB
had been very stringent on compliances and all the stake-
holders had been directed to adhere to its rules and regula-
tions, minimum service and civic norms, etc. In respect of
notified products and natural gas it had been trying to ensure
adequate availability of petroleum products, display of prices,
enforcement of retail service obligations and tariff deter-
mination to eventually move from a “fixation regime” to a
“traded regime”.b In a nutshell, PNGRB is reflective of service
provided to industry, and consumers and other stakeholders
(entities) who have benefited on account of availability of a
regulator to look after their concerns.
F. Gas Marketing Entities
Natural gas market in Gujarat had been very lucrative and

attractive for entities (players). The market was fairly well
developed compared to any other state in the country. The
a Pipeline infrastructure usage in India is denominated by PNGRB on the basis of

certain principles so as to be used as “contract carrier” i.e., in which some percentage
capacity usage of pipelines is booked by various entities or as a “common carrier”
under which any entity can use the pipeline infrastructure and the owner of the
infrastructure has to ensure the capacity for the same.
b “Fixation regime” means that the tariff rates are fixed by the entity on a bidding
basis and this is then fixed for any entity using that pipeline or CGD infrastructure.
“Traded regime” includes the system followed in developed economies where the
tariff for the pipelines is charged on an entry–exit model based on the total number
of in-and-out pipelines located in a region.
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188 ACRJ
state had a gas grid connecting all districts and multiple enti-
ties had been successfully selling natural gas across the state
(Kar et al., 2012). These entities were as diverse as coopera-
tive societies to municipal corporations. A brief description
of marketing entities and their market operations is presented
below:
Gujarat Gas Company Limited (GGCL). In 2011, GGCL

was selling the largest volume of natural gas. Since 1997,
British Gas (BG) Group had been holding controlling stake
(65.12%) in GGCL. In 2011, the other shareholders of GGCL
were foreign institutional investors (15.87%), resident Indians
(9.44%), mutual funds (4.43%) and others (5.14%). BG put
its 65% stake in Gujarat Gas for disinvestment in November
2011, attracting interest from Bharat Petroleum Corpora-
tion, Oil and Natural Gas Corporation, Gujarat State Petro-
leum Corporation, Adani Group, Torrent Power, Germany
based E.ON AG, Electricitie-De France and global private
equity firms (Srivastava, 2012). According to informed
sources in the market, company’s current value could be
$780 million (Rs. 3,900 crore). GGCL was selling natural gas
in the cities such as Surat, Ankleswar, Bharuch, Jhagadia,
Mora and Kim-Karanj. In 2010, the company had achieved
17% volume growth due to higher demand of natural gas
in industrial and transport segments. The focus had been on
high value markets. The company has term gas contract till
December 2013. In 2010, GGCL relied on GAIL PMT (49%),
GAIL APM (5%), NIKO (5%), Cairn Energy (15%) and R-LNG
(26%) for sourcing of natural gas. In 2010, GGCL sold 1005
MMSCM natural gas to the industrial segment compared to
783 MMSCM in 2008. In FY2010, GGCL sold 122 MMSCM of
natural gas to the transport segment compared to 91 MMSCM
in 2008 and 104 MMSCM in 2009. The domestic and com-
mercial segments consumed 85 MMSCM in 2010 compared to
80 MMSCM in 2009 and 72 MMSCM in 2008. The industrial
segment contributed about 83% of total volume sales. The
industrial customers were from textile (44%), chemical (19%),
glass and ceramics (11%), dye and intermediate (8%), pesti-
cide (5%), pharmaceuticals (6%) and others (6%). These indus-
trial customers were using natural gas primarily for combined
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heat and power (39%), liquid fuel replacement (40%) and

direct firing (21%). GGCL had 73 km (18”) transmission pipe-
line, about 3500 km of distribution pipelines, 11 city gate
stations and 42 CNG stations catering the need of customers
in various segments such as industrial (875+), domestic
(300,000+), commercial (6000+) and CNG (135,000+). The
transport sector had been showing good promise for future
growth and GGCL was well prepared to cater the need of
this segment. Some of the steps that had been taken by GGCL
to grow CNG customer base were: (1) Developing required
infrastructure. (2) Strategically targeting passenger cars and
the commercial vehicle segment for conversion. (3) Working
closely with kit suppliers and, distributors, financiers and
conversion garages, and setting innovative schemes to sig-
nificantly reducing kit costs, and (4) Implementing effective
branding initiatives. GGCL had been exploring new applica-
tions of natural gas. For instance, Yarn Heat Setting (YHS)
commissioned for the textile weaving industry with more
than 500 customers already signed. Similar applications in the
power sector were being explored. More important and new
applications like a gas based chilling system for the Diamond
industry, gas-based air conditioners for domestic use, CNG
fired passenger cars, and a jet dyeing application for Textile
Process Houses could provide bigger opportunity in the
coming years (Kar et al., 2012). GGCL had been very prompt
in understanding customers business and analyzing their
existing and future needs, and providing them desirable solu-
tions. GGCL had been proactive in building high customer
equity through high quality customer service. “We enter into
dialogue with opinion leaders before significant commercial
changes,” said Mr. Sharma (Sharma, 2007). SGL had been
following the practice of flexible commercial contracts to
create a win-win situation. The company had well defined
customer service standards and constantly monitoring the
system to ensure desirable results. Human resource devel-
opment (HRD) department is aligned to business strategy of
GGCL. HRD had been actively engaged in building capacities
and capabilities, promoting culture of execution and meritoc-
racy, and people process like performance and development
reviews aligned to BG Group. Above all the company had
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190 ACRJ
been successful in developing a strong HSSE culture within

the organization.
Adani Gas Ltd (AGL). AGL — a wholly owned subsidiary

of the Adani Enterprise Ltd. was incorporated for setting up
distribution network in various cities to supply natural gas to
industrial, commercial, domestic and CNG customers. It was
selling natural gas to domestic, industrial, and transport seg-
ments in Ahmedabad and Vadodara. It had been developing
infrastructure network in Faridabad and Haryana. Adani Gas
was given no objection certificates by the concerned authori-
ties to develop City Gas Distribution networks in Noida,
Khurja and Lucknow (all three cities in Uttar Pradesh) and
two cities — Jaipur and Udaipur (in Rajasthan). Adani Gas
had already initiated the infrastructure development in these
cities to meet the fuel needs of the potential customers. For
supplying to its customers, Adani Gas was getting gas from
Gujarat State Petroleum Corporation. Adani Gas was oper-
ating about 60 CNG stations and about 90,000 vehicles were
running on Adani CNG. About 710 industrial units and 960
commercial units, 135,000 domestic customers rely on Adani
PNG. For the existing customers, the company had been pro-
actively taking initiatives to increase delightful experience of
having Adani PNG connections and filling gas at Adani CNG
stations. Over the years, new initiatives like online meter
reading submission, e-invoice, and online payment through
electronic clearing system (ECS) had been implemented.
Vadodara Municipal Corporation (VMC). VMC started

selling natural gas in 1972 and was the first one to sell natural
gas in India. By May 2012, it was selling natural gas to just
over 75,000 domestic consumers. In 2011, VMC signed an
agreement to form a joint venture with GAIL (India) Ltd., in
which GAIL would have a 25% stake and VMC 25%, while
the remaining 50% would be shared by strategic partners
and financial institutions. Most of the formalities of the joint
venture (JV) had been completed and the JV was expected
to be operational soon. After the formation of the JV, the
network in the city would be expanded and new CNG gas
stations would be set up. Besides the existing domestic
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customers of VMC, the new joint venture was expected to

cater to some 85,000 new customers (The Economic Times,
2012). VMC was getting the benefit of being under the
Administered Price Mechanism formula and was able to sell
natural gas to the existing domestic customer at the lowest
rate of Rs. 5 per cubic metre. The JV was expected to sell gas
at a very competitive rate because it would have access to
domestic gas supplied by GAIL.
Charotar Gas Sahakari Mandali Ltd. It was founded in

1999 and was the first in “City Gas Distribution” from
co-operative sector in India. It was supplying natural gas
to both domestic and Small Scale Industry sector. It had
acquired the gas distribution rights for Anand, Ahmedabad
and Kheda districts of Gujarat. It had signed a MoU with
Gujarat State Petroleum Corporation Limited on 12-01-2007 at
“VIBRANT GUJARAT 2007” with a proposal to be part of the
project developments of Gujarat Government for expansion
of gas network and opening of CNG station in the concerned
districts. By 2012, its daily gas off-take from GSPC was about
90,000 SCMD. The company was also operating GSPC-GNG
station and filling gas in about 2700 Auto rickshaws and
600 cars. The daily CNG sales figure was about 13,000 kg.
Charotar Gas was supplying PNG to nearly 13,000 domestic
customers, 120 industrial customers, more than 370 com-
mercial customers, all education institution of Vallabh
Vidyanagar, laboratories, student’s hostels and trusts.
GSPC Gas. As on 1 January 2012, GSPC Gas was supplying

natural gas to various industrial, commercial, transport, and
residential segments of major cities/towns of Gujarat. The
company was supplying Piped Natural Gas (PNG) to nearly
1450 industrial customers. The company had set up 120
CNG stations in South Gujarat (29), Central Gujarat (52) and
Saurashtra (39). Out of 120 CNG stations, 48 stations were
online and 72 stations were daughter stations. South Gujarat
had cities/towns like Vapi, Navsari, Sarigam, Gundlav,
Morai, Hazira, Umargaon, and Bilimora. Central Gujarat had
cities/towns such as Karjan, Palej, Dahej, Halol, Nadiad,
Khambhat, and Gandhinagar. Saurashtra region was the
S0218927516500073.indd 191 29-06-16 2:30:31 PM

192 ACRJ
most important zone having markets like Rajkot, Morbi,

Surendranagar, Wadhwan, and Thangadh. Morbi was the
single largest market in terms of volume and value. At the
end of May 2012, GSPC Gas had close to 600 industrial cus-
tomers buying 2.5 million SCMD of natural gas. According
to informed sources in the industry, the recent price hike in
the first week of June might force some of the existing cus-
tomers (about 30%) having dual option to immediately
switch back to coal or other competing fuel. On the other
hand, the ceramic industry was believed to be going through
a very tough phase. In the recent past, the ceramic industry
had added significant capacity, but market was found to
be slowed down due to various macro and micro economic
factors. Real estate was the single largest consumer of ceramic
products like wall tiles, floor tiles, and vitrified tiles etc. was
found to be affected by economic slowdown. Hence, ceramic
industry might be going through the toughest time in the
near future. By the end of 2012, natural gas consumption in
Morbi might come down close to 1.5–1.8 million SCMD.
Sabarkantha Gas Ltd. (SGL). It was incorporated on 6 June

2006 under the Indian Companies Act 1956. The entity was
formed as a Joint Venture between Gujarat State Petroleum
Corporation Limited and Bharat Petroleum Corporation
Limited — a government of India enterprise. The company
had received authorization from Petroleum and Natural
Gas Regulatory Board in 2009 to develop city gas distribu-
tion system in Gandhinagar, Mehesana and Sabarkantha dis-
tricts of Gujarat. These districts had good potential for gas
consumption across different segments. Economic activities
and industrial developments in above districts were picking
up very fast. Traditional industries were increasing and new
business opportunities were coming up. The profile of major
medium and large scale industries in the above three districts
are presented in Annex 2.
The business model of SGL envisaged sales of natural
gas around 85–90% to industrial segment, 5–7% to trans-
port segment, and the balance to domestic/commercial seg-
ments. The transport segment consumed natural gas in the
compressed form commonly referred as CNG. At the end of
S0218927516500073.indd 192 29-06-16 2:30:31 PM

February 2012, the company was selling about 0.9 million

SCMD of natural gas. The industrial segment and transport
segment were consuming about 0.685 million SCMD and
0.182 million SCMD, respectively. The domestic and commer-
cial segments consumed about 27,000 SCMD and 6000 SCMD,
respectively. The company had the plan to provide gas con-
nections to 99,000 domestic customers by 2014 from about
59,000 by end of February 2012.
CORE VALUES OF SGL
Central value of SGL had been focused on customer satisfac-

tion. In fact recent research results had shown that customer
satisfaction is the centre stage of any customer driven organi-
zation. In order to achieve high level of customer-based brand
equity SGL identified four enabling values like employee
enrichment and satisfaction, transparency, teamwork and
commitment to health, safety and environment (see Fig. 1).
Operating Philosophy of SGL. SGL had been driven by its well

defined vision. Three important pillars of vision statement of
SGL are innovative, reliable and caring energy company. SGL
had been relentlessly trying to be innovative in terms of pro-
viding quality product at desirable price point with 24 × 7
service commitment. In order to fulfill commitment to the
customer, SGL had been driving internal process innovations.
The company had been treating its customers as business
partners. As an operation philosophy, SGL adopted all con-
cerns of customers as their own, hence extended reliability in
terms of continuous gas supply and satisfactory service to the
customer. SGL had been providing all necessary assistance
to the customers to create a “win-win” situation. Conscious
efforts had been made to create an environment through
transparent dealings where customers could feel comfort-
able to rely on SGL for their energy requirements. High
level of customer trust could translate to long term mutu-
ally beneficial relationship. SGL envisioned to be considered
as caring company among the customers. It had been found
that customers do not buy products or services rather look
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194 ACRJ
Fig. 1. Core Value System of SGL.

Source: SGL.
for memorable and viable solution to their problems. Cus-

tomers buying decision could be a combination of emotional
and rational or rational or purely emotional. SGL strategically
targeted the emotional aspect of customer purchase involve-
ment. “We need to understand and care about customer’s
concerns/problems/needs, and help them to find solutions
which address to them,” said Ravi. Unlike many other com-
peting firms SGL had been very clear about their scope of
business. “We do supply natural gas but we are in energy
business,” said Mr. Kudiasya. “Customers need energy not
just natural gas today, it is natural gas and tomorrow it may
be hydrogen/coal bed methane gas or any other fuel,” he
added. “The dynamic nature of energy business motivates
SGL to consistently explore innovative products, which could
be cost-effective, fully meet energy needs of customer and
might also replace natural gas, as a fuel, in the long run,” he
added.
S0218927516500073.indd 194 29-06-16 2:30:32 PM

CITY GAS DISTRIBUTION PROJECT
The Company had been focusing on developing Retail Gas

Business including development of Local Gas Distribution
(LGD) networks across the authorized districts in Gujarat.
Ministry of Petroleum and Natural Gas (MoPNG) Govt. of
India had accorded approval for developing LGD network
in the State of Gujarat and also Govt. of Gujarat had issued
no-objection certificate to develop and implement Natural
Gas Distribution network in Mehesana, Sabarkantha, and
Gandhinagar districts. PNGRB also accorded approval along
with marketing exclusivity till September 2014.
Marketing Operations in Important Markets

(a) Mehesana. Economy of the district had been driven by
oil and gas, chemical, engineering industry (mainly met-
allurgical industries), and food and agro processing
units. The mineral based industries in Mehesana had
been engaged in glazing and vitrifying tiles, granite
cutting and polishing, micronizing, lavigation (Chinaclay,
Fireclay), and silica sand crushing. About 7,183 small
scale industries (SSIs) were operating in Mehesana dis-
trict in chemicals, textiles, rubber and plastic articles,
metals, repairing services, food and agro processing and
engineering sector. Most of the SSIs are concentrated in
Mehesana, Kadi, Vijapur and Visnagar talukas of the
district.
(b) Sabarkantha. Traditionally, the economy of the district
had been heavily dependent on agriculture and dairy
farming. However, in the recent past production of large
quantities of clay, silica sand and bauxite had opened up
new avenues for the glass, tiles, fine bricks and crockery
units. According to the Industry Commisionerate, Gov-
ernment of Gujarat, food processing and textiles were the
other emerging sectors which could fuel the growth of
the district. Some key large scale players having opera-
tions in Sabarkantha were Sabar dairy, Pathik Agrotech,
Oracle Granite Limited, Gujarat Ambuja Exports Ltd.,
Eureka Tiles and City Tiles Ltd. About 8,000 small scale
industries in walls & floor tiles (ceramics), chemicals, and
plastic products were operational in the district.
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196 ACRJ
(c) Gandhinagar. Gandhinagar, the administrative capital of

Gujarat was carved out of Ahmedabad district in late
1960s. Gandhinagar district has four talukas such as
Gandhinagar, Kalol, Dehgam and Mansa. The economy of
the districts had been driven by sectors like textile, elec-
tronics, and food processing. Future economic and social
development of the district was expected to be driven by
infrastructure, IT/ITes sector. The district had more than
330 medium and large scale industries; more than 200
units were located in Kalol. There were more than 8000
SSIs in sectors like textiles, engineering, wood products,
and mineral-based industries. Government was devel-
oping several Special Economic Zones (SEZs) which were
likely to lead socio-economic development of the district.
Segments Available
Segments available to sell natural gas could be many

depending on the variables used to segment the entire
market. However, SGL divided entire market into four
primary segments based on nature, pattern, and volume of
consumption. These segments are domestic, commercial,
industrial, and transport sector. The first three segments are
supplied piped natural gas (PNG) through pipeline and the
4th segment primarily buys natural gas in compressed form
from CNG stations.
Domestic segment believed to have large potential
in terms of absolute number of consumers but natural gas
consumption per household was negligible (0.5–1 SCMD)
compared to industrial, and transport segment.
As per Census (2011) data the total number of house-
holds in Mehesana, Sabar Kantha, and Gandhinagar were
424,479, 481,414, and 289,990, respectively. The urban house-
hold population in the above mentioned districts were
107,943 (Mehesana), 75,375 (Sabar Kantha), and 127,996
(Gandhinagar). The rest belonged to the rural area. Average
LPG/PNG penetration in Gujarat was 38.31%.
The commercial customers normally consume about
100–3000 SCMD. The potential consumers in this segment
S0218927516500073.indd 196 29-06-16 2:30:32 PM

Table 5. Vehicle Registration Details in Mehesana, Himatnagar and

Gandhinagar (as of 31 March 2011).
Buses Cars Jeeps Taxis Three Wheelers

(Auto Rickshaw)
Mehesana 2,989 35,228 17,131 4,028 22,451
Himatnagar 812 20,090 10,057 1,024 13,768
Gandhinagar 12,732 48,502 5,422 2,843 11,511
Total 16,533 103,820 32,610 7,895 47,730
Source: Statistical Abstract of Gujarat, 2011, p. 176.
could be the tea stalls, sweet makers, restaurants, food courts,

college canteens, schools, and hotels etc. An internal estimate
suggests that SGL could sell about 50,000 SCMD of natural
gas to this segment by 2015.
The transport sector found to be one of the critical
segments-consumes CNG. Possible users of CNG are buses,
cars and station wagons, taxis, and auto rickshaw. Table 5
gives the number of vehicles registered in Mehesana, Himat-
nagar, and Gandhinagar. Average mileage per kg of CNG
was about 20 km for car and auto rickshaw.
On the other hand, the industrial segment seems to be
the most important from the volume point of view. A typical
industrial customer normally uses 2,000–60,000 SCMD of
natural gas. It has been observed that industrial customers
set up their units depending on availability of affordable
natural gas. So, depending on availability of natural gas
market development may happen in future. As pointed out
by Parmar the industrial segment has the potential to reach
1 million SCMD by 2016. These industrial customers are from
various types of industries like ceramic, textile, fertilizer,
pharmaceutical, metal products, steel, printing and dyeing,
food and beverages, and fast moving consumer goods manu-
facturers.
Choice of Target Segments
The regulatory body while accords approval asks the entities

to serve the domestic customer on priority basis, so serving
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198 ACRJ
the domestic segment becomes top most priority in terms

of regulatory compliance. However, in terms of economics
and business viability, the industrial segment was given the
top most priority at SGL followed by transport and com-
mercial segments. A subsegment like ceramic and sanitary
product manufacturers of industrial segment was given lot of
emphasis by SGL.
Customer Expectations
Consumers of all the four segments namely, industrial,

domestic, commercial, and transport sector were concerned
about potential savings, supply security, and price stability.
The domestic consumers were price sensitive but had low
possibility of switching. Other three segments had higher
switching opportunity, especially the industrial and transport
sector. The transport segment was concerned about pressure,
safety, economics, and quick service.
Branding
Branding of a product like natural gas just was not at the top
of agenda at SGL. Making a brand out of a commodity which
couldn’t be seen, touched, and felt was considered to be very
challenging for SGL. Even the corporate brand SGL was fairly
new to the market. Currently “people just know that we are
a supplier of natural gas,” said Parmar. But SGL aspires to
be seen as an energy solution provider. SGL was offering
cleaner, safer, and comparatively cheaper fuel (natural gas)
with added benefits like secured PNG supply at door step.
Continuous direct supply at door step means no storage
required as it was in the case of existing alternatives like coal,
diesel, and naphtha. CNG offered by SGL was considered to
be environment friendly, safer, and conveniently available at
CNG stations. Moreover, use of PNG and CNG marketed by
SGL could benefit the government, the upstream companies,
and the society as a whole. Use of natural gas could reduce
subsidy burden on government, and improve energy access
S0218927516500073.indd 198 29-06-16 2:30:32 PM

directly impacting the government policy. Similarly reducing

carbon foot print and enhancing energy availability would
improve life of many. Indirectly or directly SGL helps the
upstream companies for higher realization of revenue due to
sales of gas, and reducing subsidy burden from them.
Customer Feedback
Management of SGL was really very appreciative of their

customers. SGL realized that its existence depends on the
customers’ existence. “We intend to provide the best possible
services to our customers,” said Kudaisya. The employees
of SGL had been trained to treat customers as their cause
of existence. The employees were told to take good care of
customers and treat them as part of value creation process.
The employees understood that natural gas being a com-
modity was required to be marketed differently. It was clearly
stated that in the value creation process service differen-
tiation should be emphasised. Possibly high quality services
could differentiate SGL from the others and that could be
the unique selling proposition for SGL. Feedback of some
customers are presented below:
Cera Sanitaryware Limited, Kadi:
Cera had been in business since 1982. It had been a gas driven
plant since inception. As of 31 May 2012, Cera was buying
natural gas from GAIL Gas and SGL. Cera had been using gas
for drying, firing and captive power generation. The company
had a contract of buying 33,000 SCMD of gas with GAIL but
actually it was getting about 23,000 SCMD. Cera had been
using about 8,000 SCMD of gas supplied by GAIL Gas for elec-
tricity production and the rest for drying and firing. In order
to meet the actual demand Cera had signed a contract with
SGL to supply 8,500 SCMD of gas. However, as of 31 May
2012, Cera was drawing only 6,818 SCMD. Cera had been
getting gas from GAIL Gas at a much cheaper price (Rs. 8.5/
SCM) compared to SGL (Rs. 35/SCM). Such a huge price dif-
ferential had been due to sourcing of gas. GAIL Gas had been
getting domestic gas from local fields of ONGC whereas SGL
had been relying on expensive R-LNG. Customers like Cera
perceived that SGL had been deliberately charging high to
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200 ACRJ
earn super normal profit. Recent price hike in the first week of
June 2012 was perceived to be a part of marketing strategy to
exploit customers like Cera. As gas cost had been found to be
about 40% of variable costs, continuous price revision by SGL
from Rs. 17.00/SCM in 2009 to Rs. 35/SCM in June 2012, had
been putting negative impact on the bottom line of Cera. Under
such circumstances Cera had no option but to focus on energy
efficiency, process innovations, and energy savings. Cera had
been happy with supply of gas at adequate pressure and ser-
vices provided by SGL. However, price and calorific value still
remained the most important concerns for Cera. According
to S. Reddy, GM, Kilns, “relationship of Cera & SGL is like a
marriage where once you are married you have to live with all
kind of comforts and discomforts.”
Somany Ceramics Limited (SCL), Kadi:
Somany Ceramics with the plants in Kadi (Gujarat) and Kassar
(Haryana), having production capacity of 20 million square feet
per annum is the producer of the highest quality of ceramic
glazed tiles, vitrified tiles, sanitary ware or porcelain floor tiles.
According to Mr. Sandeep Suthar, DGM (Engineering), the
cost of fuel constitutes about 30–40% of total variable costs and
significantly impacts the final price of finished products. The
plant had a contract of getting 20,000 SCMD of natural gas
from GAIL Gas and had been receiving not more than 15,000
SCMD. Due to insufficient gas supply by GAIL, Somany
had entered into an agreement of getting about 20,000 SCMD
from SGL. However, Somany was consuming about 11,000–
15,000 SCMD of SGL gas. The significant price differentials
between GAIL Gas (cheaper domestic gas) and SGL (expen-
sive imported gas) had been creating wrong impression in
the mind of buyers like Somany. Market slowdown coupled
with upward movement of gas prices making ceramic busi-
ness unsustainable for Somany. “Recent increase in price
of natural gas by Rs. 3.00 plus VAT/SCM translates to
increase of Rs. 15.00/sq mt of tiles,” said Suthar. Avail-
ability of coal at relatively cheaper price (Rs. 5–7/kg) could
be a viable alternative for Somany. Over last couple of years,
Somany had been constantly working to improve efficiency
of the burner which helped them to reduce gas consump-
tion. According to Suthar, promptness of providing services
by SGL seems to be the best in the business; however, sus-
tainability of running the plant on imported gas needs to
be reviewed. “We have already taken steps to partly switch
S0218927516500073.indd 200 29-06-16 2:30:32 PM

to coal as an economically viable option,” he added. Suthar

acknowledged that environment issues are there but he was of
the opinion that the same can be tackled in all possible ways.
Bisazza India Private Limited, Kadi:
This was an export oriented unit set up in 1995 producing
mosaic tiles. For its fuel requirements, the unit was receiving
2,000 SCMD from GAIL Gas and about 6,000 SCMD from
SGL. The unit was very happy with the services, pressure,
and timely supply of gas by SGL. However, little concern over
prices was expressed by Head of Financial Department. Gas
cost was found to be 20% of product costs and stiff increase
could impact the final product price. However, Bisazza being
an export oriented unit was not very much bothered about gas
price hike.
Gopal Glass Works Limited, Kadi:
This customer was found to be very knowledgeable about gas
business. The unit was producing glass sheets with design.
The finished products produced from a continuous process,
hence the need for uninterrupted supply of fuel. Gopal Glass
had a contract of getting 21,000 SCMD from SGL and 20,000
SCMD from GAIL Gas. It had been getting about 17,000 SCMD
from GAIL and about 21,000 SCMD from SGL. As the plant
required continuous running hence it had a stand by option
of furnace oil (FO). According to Mr. Sameer Gautam, AGM
(Works) even imported gas supplied by SGL was found to be
a sustainable fuel in the long run. FO looked to be an alterna-
tive, but Gautam found it dirty from operational point of view.
However, Gautam pointed out that they couldn’t observe any
impact of type of fuel used on the quality of finished products.
According to Gautam, natural gas supplied by GAIL Gas was
found to have higher calorific value compared to SGL. Gautam
expressed his high level of satisfaction with the services of SGL,
but wanted higher calorific value and stable pricing.
DudhSagar Dairy, Mehesana:
The cooperative dairy unit had a contract of 25,000 SCMD but
was using about 6,000 SCMD. The unit had fixed higher daily
contractual quantity (DCQ) in order to use gas for generating
electricity but was not producing electricity from natural gas.
According to Pravikumar B. Bhambi, DGM (Factory, Chilling
Centres, and Project), “SGL had been offering excellent services
through its knowledgeable team having positive attitude and
high level of customer orientation.” Frequent and sudden price
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202 ACRJ
changes were said to be a minor concern but communication

of price change was a bigger concern to Bhambi. He suggested
that in order to reduce uncertainty of price change, SGL should
fix particular dates for price review and price change decision.
In case of any changes advance communication should be sent
to the customers.
Someshwar Ispat, Mandali:
This gas based plant started its operations in January 2011. It
had signed a contract of drawing maximum of 12,500 SCMD,
and data for the month of May 2012 indicated that the average
drawing was 10,932 SCMD. The client was happy with the gas
supply, flow rate and maintenance support provided by SGL.
However, the concerned authority raised an issue related to
heavy penalty charged to Someshwar Ispat for overdrawing
and was visibly quite unhappy with the way the incidence was
handled by SGL. It was observed that continuous and stiff price
hikes found to affect the client more than anything else.
Asian Granito India Ltd., Himatnagar:
This customer had two divisions. The vitrified and wall tiles
division had contract of drawing maximum of 42,000 SCMD
and 38,000 SCMD respectively. Consumption data for May
2012, indicated that the vitrified and wall tiles division con-
sumed 20,905 SCMD and 22,835 SCMD, respectively. Since
2004–05, Asian was getting gas from GSPC Gas till 2007. Since
then the Asian account had been transferred to SGL. Due to
some of the pending issues the client expressed displeasure
towards SGL. One of the burning issues was raising separate
bill for gas and transportation charges. It was told that there
were critical tax implications on both parties. On gas price 15%
VAT was levied out of which 11% was reimbursable to client
like Asian Granito. On the other hand on the transportation
component service tax (12.36%) was levied and this was fully
reimbursable. According to Kalidas Patel, Chief Finance Officer,
such a bifurcation in the billing was provided by SGL in the
early days. However, in recent times, this facility was denied
by SGL. “A few customers in Himatnagar are still getting
the bifurcation and hence they are able to get huge financial
gains,” said Kalidas. “Ceramic industry is highly competitive
and an annual saving of Rs. 4 million makes a big difference
to the bottom line,” he added. It was learnt that Asian signed
a new contract with SGL and the old contract transferred from
GSPC was dismantled. “We are operating well within the con-
tract which was fully agreed upon by the client and there is no
S0218927516500073.indd 202 29-06-16 2:30:32 PM

provision for separate billing of gas and transportation charges,”

said Parmar. “We are not a transportation company, hence it is
difficult for us to segregate the bill,” he added.
Neptune Traders, Himatnagar:
The unit had been using FO since 2007, but recently switched
to natural gas. The unit had been producing zinc power used
as a raw material by the ceramic industry and tyre industry.
The plant capacity was about 300 tons/month, but due to
unavailability of raw material average production was about 70
tons/month. According to Mr. Bhupendra Patel, co-owner of
the unit average consumption of FO used to be about 500 litre/
day. Natural gas cost/kg of finished product was about Rs. 6.00
compared to FO cost of Rs. 8.00; cheaper in case of natural
gas as compared to FO. “Cost savings of Rs. 2/kg translating
to over Rs. 1,40,000/month makes economic sense to switch
to natural gas”, said Patel. However, recent gas price increase
could eat into the savings and could upset the economic benefit
of natural gas as a fuel. Any further price hike might force
Patel to rethink about the alternatives.
Vinayak TMT Bars Pvt. Ltd., Dahegam:
In early 2009, Vinayak TMT started operations of its plant with
a capacity of 300 Metric Ton (MT)/day. For the first 5–6 months
it used FO and then switched to coal gasifier and for last one
year Vinayak had been using natural gas. In the early days coal
was being purchased from domestic market, especially from
Nagpur. Other suppliers were from Jharkhand and Bihar. In
case of unavailability of desired quality coal in the domestic
market, Vinayak had to rely on imported coal from Aus-
tralia/South Africa. Although coal was economical but there
were environmental concerns, supply and storage issues. For
manufacturing one MT of TMT bar 40 SCM gas was required
whereas 80–100 kg of coal was consumed. For the last three
years, coal price had been stable around Rs. 6–7/kg whereas
gas prices almost doubled. At Rs. 14–16/SCM gas looked the
most appropriate if not the most economical option. It was
observed that gas price at Rs. 35.00 (including VAT)/SCM
makes one of the costliest options. Therefore, “we are seriously
considering switching back to coal as at the current gas price
it is highly uneconomical,” said Mr. Praksh Patel, Director. “Of
course gas is cleaner option but we have to look for an econom-
ically feasible and viable option,” he added. Going back to coal
needed additional investment of Rs. 1 crore (Rs. 10 million) for
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204 ACRJ
building two gasifiers, however the additional investment could

be recovered within three months. Of course coal based plant
demands higher maintenance cost due to frequent maintenance
and plant shot down-which need to be kept in mind before
reversing the decision.
EMERGING CHALLENGES FOR SGL
SGL had been facing different kind of challenges in the

market. They had successfully converted some of the chal-
lenges into opportunities and developed strategies to manage
them over time. Some of the challenges are discussed below.
Customer Perception Management
There had been a very clear perception among the customers

that natural gas was provided by the government free of
cost and companies like SGL had no right to charge the cus-
tomer. Many of them believed that there should not be any
charge for gas connection. However, these customers were
little aware about the reality of gas pricing scenario and the
amount of investment made to develop necessary infrastruc-
ture for supplying gas to the point of consumption. Unlike
liquefied petroleum gas (LPG) natural gas was not subsi-
dized and marketing companies like SGL could not provide
any kind of subsidy to the customers. The state government
was trying to create a cleaner environment and encourage
use of greener fuel like natural gas. Many of the industrial
customers had been showing strong cost consciousness and
domestic customers were equally concerned about price.
Decades of subsidization of petroleum products like LPG,
petrol, diesel and kerosene had created a long-term impres-
sion in favour of subsidy. Even some do argue in support
of free supply of utility products like electricity, water,
and natural gas. The government had been providing food
subsidy to ensure food security for the poor. Various subsidy
policies had been implemented in petroleum sector likely to
continue in the future. Especially subsidy on kerosene, LPG,
S0218927516500073.indd 204 29-06-16 2:30:32 PM

and diesel could be there for years to come. Technically and

ideologically speaking, subsidy had been designed to increase
affordability and accessibility for the weaker section of the
society. However, over several decades intended benefit of
subsidy couldn’t reach a significant part of the weaker section
but economically better off could get the benefit. Compa-
nies like SGL had been facing severe challenge to change the
mind-set of consumer from “subsidy or free of cost” to “pay
for it”. “It is difficult but manageable” to change the percep-
tion of the customers, said Mr. Parmar. “We had done it in
places like Mehesana with significant success,” he added.
Demand and Supply Side Management
SGL’s ability to tie-up new sources of gas to meet the incre-

mental demand would remain critical for its growth, although
the presence of strong promoters with access to gas provides
some comfort. SGL being the JV of BPCL and GSPC had been
enjoying the benefit of getting natural gas from the share of
BPCL and GSPC from Petronet LNG’s long-term contract. As
per the government priority allocation policy, SGL was allo-
cated 77,000 SCMD of natural gas from KG-D6 block for city
gas distribution especially to cater the need of the domestic
and transport consumers. Due to sharp fall in production of
gas from KG-D6 , Reliance Industries stopped supply to SGL
in September 2011. Long-term LNG contracts were increas-
ingly difficult to find, so short-term contract and spot LNG
were the possible options for SGL (see Table 6). SGL’s depen-
dence on R-LNG was likely to increase in the future. Demand
and supply of natural gas depends on the price of domestic
gas, price of R-LNG and price of competing fuel. Demand
fluctuations both in transport and industrial segments had
been observed by SGL. Industrial demand fluctuations could
be due to periodic/cyclical operations of some of the indus-
tries. At times, demand could suddenly go up or down.
Especially in case of unexpected demand ensuring adequate
supply at desirable and affordable price could be a challenge
for SGL in the near future.
S0218927516500073.indd 205 29-06-16 2:30:33 PM

206 ACRJ
Table 6. Gas Sourcing Mix of SGL at the end of May 2012.
Source SCMD Price % Share Rs./SCM

($/mmBtu)
GSPC (Long Term) 150,000 9.6 18.75 17.1
BPCL (Long Term) 250,000 9.78 31.25 17.5
BPCL (Short Term) 250,000 17.5 31.25 31.3
Spot LNG 150,000 17 18.75 30.4
Total 800,000 100
Note: $1 = Rs. 56.00 and 1 mmBtu = 27.993 SCM.
Source: Authors analysis based on inputs provided by the company executives.
Managing Customer Acquisition and Retention
Customer acquisition cost in the early stages of product adop-

tion was believed to be high. During initial phases, cost of
building network infrastructure and other transaction costs
were high. As the market expanded and customer base
increased the acquisition cost went down especially in the
industrial segment. During the project development stage and
initial customer acquisition drive SGL was investing signifi-
cant amount of time to convert nonusers to users. Customer
retention cost was negligible in case of industrial segment.
“We do spend considerable amount of time to take care of
our customers and our customer retention is driven by our
commitment to service,” said Parmar. According to Kudaisya
“customers have all the reasons to be demanding and we
should be ready to handle such situations.” Customer acqui-
sition cost for domestic PNG connection was high both in
urban and rural areas. Service cost was found to be relatively
higher in rural areas due to several factors like scattered cus-
tomers. In SGL, the industrial segment contributed more than
80% of volume sales. Most of the industrial customers had
been profitable partners for SGL. However, the recent devel-
opments like Indian rupee depreciation against USD turned
the table upside down.
S0218927516500073.indd 206 29-06-16 2:30:33 PM

Pricing Management
On account of higher spot gas purchase costs, SGL had been

witnessing a fall in its contribution and operating margins
in the Financial Year (FY) 2010 and FY 2011 (9 months). The
margins were likely to undergo downward correction due
to unavaiailability of cheaper domestic gas in the near term
and rising spot gas prices. Off late upward trend in the
gas pricing was making life difficult for Kudaisya and the
bottom-line had been under severe pressure. Recent increase
in natural gas prices could not be passed to the customer
and SGL had been absorbing the incremental cost. Adminis-
tering price changes looked the most difficult task for SGL.
“Any increase to current price (Rs. 30.70 plus 15% VAT/SCM
could encourage existing price sensitive customers, especially
in the industrial segment to switch back to alternative fuel,”
Kudaisya.
He also acknowledged that under high uncertainty of
gas supply mix and price could make the life even more dif-
ficult for gas marketing entities like SGL. “Honestly speaking,
managing price and keeping the customers happy could con-
tinue to pose significant challenges to SGL,” he added. Avail-
ability of Euro-IV & Euro-V grade diesel might very well
compete with CNG in terms of environment friendliness.
“Economic benefit seems to be the prime driver for CNG in
our markets,” said Parmar. With existing subsidy policy any
significant increase in the CNG price could make the fuel
uneconomical. Increasing dependence on R-LNG could make
the CGD business unviable. Not many customers were found
ready to buy PNG/CNG at market determined price. “In
the long run, CGD business can survive only if government
ensures 30–40% of supply of domestic gas through preferen-
tial allocation,” said Kudaisya. Such a move would ensure
better pricing mix for companies like SGL.
Administering the price changes was found to be one of
the most difficult jobs in hand due to:
(i) fear of consumer switching back to other economically
viable alternatives;
(ii) high level of government intervention.
S0218927516500073.indd 207 29-06-16 2:30:33 PM

208 ACRJ
Despite stiff rise in R-LNG price, rupee depreciation and lack

of supply of domestic gas, companies like SGL could not
charge market determined price to the buyers. SGL could
afford to absorb the increased cost for short span but in the
medium to long run such tactics might prove costly. Many
of the natural gas marketing companies believed that serving
the domestic segment was nothing less than carrying out cor-
porate social responsibility. But the industrial segment was
considered to be the cash cows for the gas marketing entities.
Due to undesirable developments in the recent past the cash
cows becoming loss making proposition for the entities like
SGL.
Price discrimination. In most cities in India natural gas mar-

keting entities had been enjoying natural monopoly due
to marketing exclusivity. However, very few were using
price discrimination. Probably price discrimination could be
observed across different segments but not within segments.
One could observe that the prices charged to domestic cus-
tomers were lower compared to industrial customers. The
prices charged by SGL within a segment were the same.
There could be scope for charging different prices to different
customers depending on their size of gas purchase and con-
sumption. As the natural gas market was in the evolving
stage so no such advanced phenomenon was found.
Managing Local Administration. Local rules and regulations

were found to be very difficult to handle. Despite state gov-
ernment and PNGRB authorization SGL had been facing
serious hurdles from local bodies like municipal corporations
and block development authorities.
Managing Billing and Payment Schedule. Billing cycle at SGL

was fortnightly for the industrial customers. Meter reading
had been taken on 15th of the month and bills were dis-
patched within next two days and the clients were advised
to pay within 7 days of receiving the bill. The industrial cus-
tomers could pay through cheques or through electronic
clearing system (ECS). In case of delayed payment, SGL
S0218927516500073.indd 208 29-06-16 2:30:33 PM

could levy 2% interest on the billing amount and if the client

defaults that could lead to disconnection of supply. However,
cases of disconnection were rare.
Efficient Management of Customer Mindset. Industrial customers

in Gujarat were largely small and medium enterprises (SMEs)
and understood their business very well (Kar & Sahu, 2012).
They had been constantly searching for economic rationality
to switch back to natural gas/to use natural gas for the very
first time. Most of these SMEs had been self-managed.
These industrial customers found to be very knowledgeable
about their business and didn’t hesitate to ask critical and
relevant questions. Like any other CGD company, we had
been facing considerable amount of challenges to convince the
customers, said Parmar. “The first and foremost challenge we
face to change the mindset of a prospective customer,” added
Parmar. The industrial customers had been using various
fuels for their energy requirements. These fuels were not
necessarily cheaper than the natural gas supplied by SGL.
Even at places like Mehesana, SGL had to compete with
GAIL Gas — the existing supplier of natural gas. Customers
had been supplied natural gas at rock bottom price by the
competitor because they had access to APM gas. However,
the quality of gas supplied by the competitor was inferior
to SGL. Despite that, the toughest challenge was to convince
the customers to switch to natural gas supplied by SGL. If
customers could evaluate the economic and safety aspects
of natural gas of SGL, it could be easily the better option
compared to other fuels and natural gas supplied by the com-
petitor. “Looking at the long-term prospects SGL is focusing
on high intangible benefits and service delivery commitment
to convince non-users to use natural gas supplied by SGL and
existing user of natural gas to immediately switch to us,” he
added. Some of the intangible benefits were no impurities,
high safety, zero pollution and less running/maintenance
cost compared to existing alternatives like coal. In the initial
days of operations, the objective was to create opinion leaders
whose positive views could be used as drivers to convince
others. It was expected that these innovators and early
adopters would educate the prospective customers. According
S0218927516500073.indd 209 29-06-16 2:30:33 PM

210 ACRJ
to Parmar about 3% innovators really made the job easy for

SGL. They became reference points for the other prospective
customers.
Managing Customer Adoption Process. “It was truly a chal-

lenging task to sign gas selling contract with the first few cus-
tomers,” said Parmar. Of course, there were few risk takers
who were convinced because of their own conviction and
the long-term benefits of natural gas supplied by SGL. These
innovators were likely to play the role of opinion leaders.
Without doubt they were the true brand ambassadors for
SGL. The next groups of customers were early adopters and
late adopters. Because of these two categories of customers,
SGL is pretty much comfortable in Mehesana, he added. “We
knew we will make inroads into the nonusers and existing
users of natural gas,” said Parmar. “As a part of our plan
we wanted the nonuser to become partial user and then full
user,” said Parmar (see Figure 2). Probably, we managed the
customer conversion cycle much better than we expected, he
added. Within no time, nonusers came to SGL for gas con-
nections. More importantly, the existing users of natural gas
(supplied by the competitor) partially switched to SGL. This
was just opposite to the initial days when SGL had to go to
the prospective users.
EŽŶͲƵƐĞƌŽĨ WĂƌƚŝĂůƵƐĞƌƐŽĨ
EĂƚƵƌĂů'ĂƐ EĂƚƵƌĂů'ĂƐ
;ƵƐƚŽŵĞƌƐƵƐŝŶŐ ƐƵƉƉůŝĞĚďǇ^'>
ŽĂů͕>W'͕^<K͕>K͕ &ƵůůƵƐĞƌŽĨEĂƚƵƌĂů'ĂƐ
,^͕ĂŶĚEĂƉŚƚŚĂ ;ƵƐƚŽŵĞƌƐƵƐŝŶŐ ƐƵƉƉůŝĞĚďǇ^'>
ĞƚĐ͘Ϳ ŽĂů͕>W'͕^<K͕
EĂƉŚƚŚĂ͕ͲEŝŶĞ͕ ;ƵƐƚŽŵĞƌƐĐŽŵƉůĞƚĞůǇ
>K͕ĂŶĚ,^ĞƚĐ͘н ĚĞƉĞŶĚĞŶƚŽŶ^'>͛ƐEĂƚƵƌĂů
EĂƚƵƌĂů'ĂƐƐƵƉƉůŝĞĚ 'ĂƐĨŽƌĂůůŽƉĞƌĂƚŝŽŶƐͿ
ďǇƚŚĞĐŽŵƉĞƚŝƚŽƌͿ
hƐĞƌŽĨEĂƚƵƌĂů
'ĂƐƐƵƉƉůŝĞĚďǇ
ƚŚĞĐŽŵƉĞƚŝƚŽƌ
Fig. 2. Customer Adoption Process.

Source: Partially adapted from Kar et al., (2012).
S0218927516500073.indd 210 29-06-16 2:30:33 PM

Managing Health, Security, Safety and Environment (HSSE)

Issues. HSSE issues had been posing significant challenges to
SGL. “Safety of consumer and public at a large is of prime
importance to SGL,” said Kudaisya. SGL had been very sen-
sitive and careful about ensuring 100% safe environment.
Before building any pipeline, SGL had been creating public
awareness about health, safety and environmental challenges
of natural gas network and its use. “Even after building the
network, SGL keeps on creating awareness among various
stakeholders,” said Parmar. “SGL had been conducting HSSE
related workshops for current and prospective customers and
other stakeholders,” said Mohaptra. Such awareness cam-
paigns were found to be effective and productive.
Managing Competency and Capacity Building Process. Compe-

tency and capacity building had been a very important issue
for CGD business. The natural gas industry in India was at
infancy stage; therefore shortage of skilled, competent and
capable resources was clearly evident. According to Duggal
(2011), “Not many people have expertise and competency
to handle complicated issues in gas business — be it project
execution, commercial or marketing.” Companies like SGL
had to meaningfully engage in talent hunt, competency and
capacity building. An additional challenge for SGL was to
retain the well trained manpower. “We had no option but to
build competency and capacity,” opined Kudaisya. “SGL’s
unique selling proposition (USP) had been capacity building
and I would be happy if a newly recruited employee works
for 4 years in SGL,” he added. An employee gets an oppor-
tunity to work in several multifunctional teams over three
to four years. Such exposers make an employee competent
and capable in different areas. SGL had been providing nec-
essary support to employees for their fast track growth and
development. The company had been following practice of
identifying skill gap and providing necessary training to the
employees. Such training could be short term or long term in
nature.
S0218927516500073.indd 211 29-06-16 2:30:33 PM

212 ACRJ
Customer Complaints. SGL had its own complaint handling

section which was taken care of by operations and main-
tenance (O&M) department. The O&M department spends
adequate time on preventive maintenance. There were 54 dif-
ferent types of preventive maintenance measures taken by
the O&M department. Despite all the preventive measures
complaints had been received related to flow computer, elec-
tronic valve converter, meter related complaints, gas supply
stoppage, and billing errors. The complaints regarding pres-
sure drop were almost negligible. According to Parmar, SGL
was supplying gas at more than the required pressure. For
example, most of our customers required gas at a pressure of
1.5–2 bar but SGL could supply gas at a pressure of about 5
bar, added Parmar. SGL had been receiving about 2–6% com-
plaints per month from the industrial customers and most of
them were genuine. However, such complaints were caused
due to third party damage done to the network. In case of
such complaints, the local O&M team had been taking quick
actions to address the issues within 10–20 minutes.
Managing Customer Expectations. The best way to manage cus-

tomers expectations is to exceed their expectations. In order
to provide the best possible services to its customers, SGL
had been constantly training the employees to serve the cus-
tomers with utmost priority. The existing customers had been
well treated and served. However, managing price perception
remained a tricky element. Price and economics of alternative
fuel had been the driving force for customer decisions. The
existing customers were expecting the gas price to be fixed
at the current level. The prospective customers found to be
overlooking numerous merits of natural gas but focusing on
economic aspects only. One of the problems SGL would face
that — the existing customers are reducing gas consumption
and switching back to cheaper alternatives in the near future.
Despite of all possible hindrances, officials at SGL were
determined to expand the customer base and maintain high
quality service delivery standards.
S0218927516500073.indd 212 29-06-16 2:30:33 PM

REFERENCES
Duggal, Vijay, 2011. Capacity building in city gas business, Workshop

on Issues and Challenges of City Gas Distribution in India, 29
October, Rajiv Gandhi Institute of Petroleum Technology, Rae
Bareli.
Kar, Sanjay and Sahu, Subrat, 2012. Managing natural gas business: A
case of Bharat Natural Gas Company Limited, Emerging Markets
Case Studies, Vol. 2, No. 1, pp. 1–22.
Mahalingam, Sudha, 2011. Consumer perspective in city gas business,
Workshop on Issues and Challenges of City Gas Distribution
in India, 29 October, Rajiv Gandhi Institute of Petroleum
Technology, Rae Bareli.
CNBC-TV, 2011. Spot LNG prices to soften further in 2012,
December 27, http://www.moneycontrol.com/news/business/
spot-lng-prices-to-soften-further2012-petronet-lng_639954.html.
Accessed on June 14, 2012.
Reuters, 2012. Global LNG-Asian LNG remains steady above $18,
May 25, http://www.reuters.com/article/2012/05/25/markets-
lng-idUSL4E8GO3G020120525. Accessed on June 14, 2012.
Sharma, Shaleen, 2007. City gas distribution in India — Key success
factors, a presentation made at 2nd Annual CitiGas India
Conference, 5–6 September, New Delhi, India.
Srivastava, Suchi, 2012. BG likely to offer MGL stake along with
Gujarat unit, Economic Times, 31 January. http://economictimes.
indiatimes.com/news/news-by-industry/energy/oil-gas/
bg-likely-to-offer-mgl-stake-along-with-gujarat-unit/
articleshow/11692632.cms. (Accessed on 31 January 2012).
Statistical Abstract of Gujarat, 2011.
The Economic Times, 2012. Formalities for setting up VMC-GAIL joint
venture company over, May 30.
S0218927516500073.indd 213 29-06-16 2:30:33 PM

214 ACRJ
Exhibit 1
Entities Selling/Distributing Natural Gas in Gujarat
Entity Name Area of Operation Segments
Adani Energy Limited Ahmedabad and Vadodara Industrial, Domestic,

Commercial and Transport
(CNG)
Charotar Gas Anand Industrial, Domestic,
(CNG)
GAIL Vadodara, Kadi, Kalol, Mehesana Industrial, Domestic,
(CNG)
GSPC Gas Rajkot, Thangad, Morbi, and Vapi etc. Industrial, Commercial,
Domestic and Transport
(CNG)
Gujarat Gas Company Surat, Bharuch and Ankleshwar Industrial, Domestic,
(CNG)
HPCL Ahmedabad Only Transport
Sabarkantha Gas Gandhinagar, Mehesana and Industrial, Commercial,
Sabarkantha Domestic and Transport
(CNG)
Vadodara Municipal Vadodara Domestic and Commercial
Corporation
Source: Partially adapted from Kar et al., 2012.
S0218927516500073.indd 214 29-06-16 2:30:33 PM

Map 1
Natural Gas Pipeline Network in Gujarat
Source: GSPL.
S0218927516500073.indd 215 29-06-16 2:30:33 PM

216 ACRJ
Annex 1
Key Task of PNGRB
Tasks Details
Addressing issues of continuing anomalies in pricing and subsidies
which affects the competitive positions of downstream sector.
Addressing access to infrastructure on principles of contract
carriage or common carrier to be applied on non-discriminatory
principles. These principles include specifying pipeline access
To protect consumer interest code. PNGRB’s task is to evolve an access code for non-
by fostering fair trade and com- discriminatory third party access to common infrastructure after
petition amongst entities by meeting own genuine requirements.
1
creating environment for level Facilitating creation of a trading platform for crude oil, petroleum
playing field in downstream products, natural gas and pipeline capacities.
oil and gas sector by: Ensuring competitive environment and transparent bidding
process with selection criteria that incentivizes infrastructure
(Pipeline) investment.
Ensure that ownership of infrastructure by any CGD or
any company does not become a barrier to competition and
disincentive creation of vertically integrated monopolies.
Register entities so as to elicit Market petroleum products and establish storage facilities. The
serious participation from storage facilities can be for storage of any petroleum product
industry in all segments of or for natural gas storage. Also, PNGRB ensures adequate
downstream energy value availability, display of prices, equitable distribution of petroleum
2 chain on such terms which are products along with enforcement of retail service obligations and
fair, encourage competition, continuous monitoring of transportation rates.
create adequate and efficient
infrastructure. PNGRB registers Establish and operate Liquefied Natural Gas (LNG) terminals.*
entities to:
Lay, build, and operate or expand a common carrier or contract
3 Authorize entities to: carriage.
Lay, build, and operate or expand city gas distribution network.
Transportation rates for common carrier or contract carriage.
Access to city gas distribution network.
Tariffs to be reasonable and allowable. Also, Tariffs have to
eventually move from a “fixation regime” to a “traded regime”.
4 Regulate by Regulations: Fixation Regime means that the tariff rates are fixed by the Entity
on a bidding basis and is fixed for any entity using that pipeline or
CGD infrastructure. Traded Regime includes the system followed
in developed economies where the tariff for the pipelines is
charged on an Entry — Exit model based on the total number of in
and out pipelines located in a region.
Source: PNGRB.
*LNG regasification terminals should be established in order to receive Liquefied Natural Gas (LNG) from ships and
regasifying the LNG to natural gas form for further transmission.
S0218927516500073.indd 216 29-06-16 2:30:33 PM

Annex 2
Major Industries and Customers of SGL in Sabarkantha, Mehsana and Gandhinagar

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<ĂĚŝ;DĂŶĚĂůŝͿ DĞŚƐĂŶĂ ^ŽŵĞƐŚǁĂƌ/ƐƉĂƚ ZŽůůŝŶŐZŽĚƐ ϭϮϱϬϬ ϭϬϵϯϮ
<ĂĚŝ;DĂŶĚĂůŝͿ DĞŚƐĂŶĂ ,ĞĂǀǇDĞƚĂů;hŶŝƚ/͕//͕ĂŶĚ///Ϳ DĞƚĂůWƌŽĚƵĐƚƐ ϭϵϴϬϬ ϭϬϯϰϮ
<ĂĚŝ DĞŚƐĂŶĂ ŚŽŬƐŚŝdƵďĞŽŵƉĂŶǇ>ƚĚ͘ ůůŽǇ^ƚĞĞůWŝƉĞ
<ĂĚŝ DĞŚƐĂŶĂ DĂĚŚƵƐƵĚĂŶĞƌĂŵŝĐƐ dŝůĞƐ
<ĂĚŝ DĞŚƐĂŶĂ ƐŚŝŵĂ&ĂďƌŝĐƐ ŽƚƚŽŶůŽƚŚ
<ĂĚŝ DĞŚƐĂŶĂ ,ǇŶŽƵƉ&ŽŽĚĂŶĚKŝůŝŶĚƵƐƚƌŝĞƐ>ƚĚ͘ ĚŝďůĞKŝů
DĞŚƐĂŶĂ DĞŚƐĂŶĂ ĂĚŝůĂ,ŽƐƉŝƚĂůWƌŽĚƵĐƚƐ>ƚĚ͘ ,ŽƐƉŝƚĂůƋƵŝƉŵĞŶƚƐ
DĞŚƐĂŶĂ DĞŚƐĂŶĂ ƵĚŚƐĂŐĂƌĂŝƌǇ ĂŝƌǇƉƌŽĚƵĐƚƐ ϮϱϬϬϬ ϱϵϱϬ
DĞŚƐĂŶĂ DĞŚƐĂŶĂ ^ǁĂƐƚŝĐŬĞƌĂĐŽŶ>ƚĚ͘ ĞƌĂŵŝĐƐ ϴϬϬϬ ϰϬϵϵ
DĞŚƐĂŶĂ DĞŚƐĂŶĂ sŝŵĂůKŝůΘ&ŽŽĚ>ƚĚ͘ &ŽŽĚƉƌŽĚƵĐƚƐĂŶĚŽŝů
DĞŚƐĂŶĂ DĞŚƐĂŶĂ EŝƌŵĂ>ƚĚ͘ ^ŽĂƉĂŶĚĚĞƚĞƌŐĞŶƚ
DĞŚƐĂŶĂ DĞŚƐĂŶĂ DĐĂŝŶ&ŽŽĚƐ WŽƚĂƚŽĐŚŝƉƐ ϴϬϬϬ ϲϮϮϵ
<ĂůŽů 'ĂŶĚŚŝŶĂŐĂƌ ƌǀŝďŶĚDŝůůƐ dĞǆƚŝůĞ
<ĂůŽů 'ĂŶĚŚŝŶĂŐĂƌ ^ŝŶƚĞǆ/ŶĚƵƐƚƌŝĞƐ>ŝŵŝƚĞĚ tĂƚĞƌ^ƚŽƌĂŐĞdĂŶŬƐ ϱϬϬϬϬ ϰϯϲϬϯ
<ĂůŽů 'ĂŶĚŚŝŶĂŐĂƌ /ŶĚŝĂŶ&ĂƌŵĞƌƐ&ĞƌƚŝůŝǌĞƌŽŽƉĞƌĂƚŝǀĞ hƌĞĂ͕ŵŵŽŶŝĂ
<ĂůŽů 'ĂŶĚŚŝŶĂŐĂƌ ůƵĞ^ƚĂƌ/ŶĚƵƐƚƌŝĞƐ DĞƚĂůWƌŽĚƵĐƚƐ ϰϬϬϬ ϯϱϱϬ
<ĂůŽů 'ĂŶĚŚŝŶĂŐĂƌ :W^ƚĞĞůZŽůůŝŶŐDŝůůƐ DĞƚĂůWƌŽĚƵĐƚƐ ϮϬϬϬ ϵϲϯ
<ĂůŽů 'ĂŶĚŚŝŶĂŐĂƌ ^ŚĂŚůůŽǇƐ>ƚĚ ZŽůůĞĚD^^ŚĞĞƚƐ ϮϱϬϬϬ ϮϱϬϳϭ
ĞŚŐĂŵ 'ĂŶĚŚŝŶĂŐĂƌ sŝŶĂǇĂŬdDdĂƌƐ ZŽůůŝŶŐZŽĚƐ ϭϱϬϬϬ ϭϮϬϬϬ
'ĂŶĚŚŝŶĂŐĂƌ 'ĂŶĚŚŝŶĂŐĂƌ 'ĞŶdĞ<dĞĐŚŶŽůŽǇ tŝƌŝŶŐ,ĂƌŶĞƐƐ
Source: Industries Commissionerate, Government of Gujarat and SGL.
S0218927516500073.indd 217 29-06-16 2:30:34 PM

Case Study - Marketing Management

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ASIAN CASE RESEARCH JOURNAL, VOL.

20, ISSUE 1, 177–217 (2016)

© 2016 by World Scientific Publishing Co. DOI: 10.1142/S0218927516500073

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about the current and potential challenges of the business

NATURAL GAS MARKET IN INDIA

India’s natural gas production increased marginally by 10%

S0218927516500073.indd 178 29-06-16 2:30:31 PM

be driven by adequate gas supply at reasonable and afford-

NATURAL GAS MARKET IN GUJARAT

Gujarat has many high energy consumption industrial areas

S0218927516500073.indd 179 29-06-16 2:30:31 PM

A. Gas Demand and Supply

Natural gas production in Gujarat had been showing declined

B. Gas Pricing

Historically there had been two types of gas pricing mecha-

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Table 1a. Projected Gas Demand (in MMSCMD) in Gujarat FY2009–

2009 2012 2015

Total 71 103 122

Table 1b. Existing Natural Gas Supply Sources in Gujarat.

Suppliers Sources Volume of Supply

charges, marketing margin/service charges, and taxes. The

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Table 2. Gas Prices in India.

Producer/Source Land Fall Marketing Central Transmission Service Total

Source: Compiled from different sources.

Price of LNG imported under term (short-term or long-

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C. Tax Structure

Government levied 5% custom duty on regasified LNG

D. Wider Use of Natural Gas

Natural gas could find wide variety of end users ranging

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Table 3. End Users of Natural Gas.

End User Carbon Purpose Substitute

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Table 4. Price Comparison and Economics of Alternative Fuels.

Customer Fuel Unit of Gross Price Vat % Vat Total Price

Naphtha Ltr. 11,200 65.02 18.5% 12.03 77.05 6.88

Petrol (MS) Ltr. 10,800 59.15 23% 13.60 72.75 6.74

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E. Regulatory Environment

Different sectors of Indian economy had progressively moved

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authorize entities and to regulate by regulations the access to

F. Gas Marketing Entities

Natural gas market in Gujarat had been very lucrative and

a Pipeline infrastructure usage in India is denominated by PNGRB on the basis of

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Gujarat Gas Company Limited (GGCL). In 2011, GGCL

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heat and power (39%), liquid fuel replacement (40%) and

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been successful in developing a strong HSSE culture within

Adani Gas Ltd (AGL). AGL — a wholly owned subsidiary

Vadodara Municipal Corporation (VMC). VMC started

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customers of VMC, the new joint venture was expected to

Charotar Gas Sahakari Mandali Ltd. It was founded in

GSPC Gas. As on 1 January 2012, GSPC Gas was supplying

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most important zone having markets like Rajkot, Morbi,