New Delhi: The petroleum and natural gas regulator has warned that it will encash bank guarantees and terminate contracts of city gas distributors if they fail to submit annual performance bond guarantees (PBG) on time.
A performance bond is a financial guarantee and is required for grant of authorization to an entity that wins a project to set up and operate piped natural gas (PNG) and compressed natural gas (CNG) networks.
Such guarantees are required to be submitted at regular intervals as a project progresses towards completion. It is usually in the form of a demand draft, pay order or bank guarantee from any scheduled bank for the required amount.
The Petroleum & Natural Gas Regulatory Board (PNGRB) said in a notification dated 3 September that performance bond guarantees from a few entities had not been received as required. However, it did not divulge details of these entities.
“It is the responsibility of the entity to timely renew the PBG and in case the PBG is not so renewed at least one month before expiry of the PBG, the PBG shall be encashed by the Board and the authorisation may be terminated,” it said.
The regulator reiterated that timely renewal of the PBG is the responsibility of the city gas distribution entity.
“All authorized entities are therefore advised to ensure strict compliance with the above provisions regarding renewal and submission of the performance bond and performance bank guarantee,” it added.
In March, the standing committee on petroleum and natural gas had raised concerns over slow implementation of projects. City gas distributors had provided 14.2 million domestic PNG connections and established 7,513 CNG stations across the country as of 31 December 2024, the committee said in a report in March.
Delayed implementation
“The implementation of city gas distribution network projects has been relatively slow and pro-rata targets regarding minimum work programme have been revised on account of covid, delay in commissioning of natural gas pipeline, etc,” the committee said.
The performance bond guarantee amount ranges from ₹1.5 crore to ₹50 crore. If a bank guarantee is submitted as a PBG, it should be valid initially for three years and must be renewed at least three months before expiry for the next three years and so on until the period of authorisation.
In March, the regulator proposed to add insurance surety bonds to bank guarantees and demand drafts as a financial instrument to ensure the timely completion of city gas distribution projects and pipelines for petroleum products.
The PNGRB has so far authorized 307 areas covering almost the entire mainland to expand the coverage of city gas networks. The target for entities authorized by PNGRB is to provide 126.3 million PNG connections and establish 18,336 CNG stations by 2033.