Oil firms India: After parliamentary panel flags limited CBG progress, state oil firms cancel 87 LoIs - infrabuddy.com

Oil firms India: After parliamentary panel flags limited CBG progress, state oil firms cancel 87 LoIs

New Delhi: State-run oil and gas companies have cancelled letters of Intent (LoIs) issued to 87 “non-serious candidates” for procuring compressed biogas (CBG) after a parliamentary panel recommended the review of LoIs, citing limited progress in building CBG plants.

Oil and gas companies issue LoIs to entrepreneurs to procure CBG from them. The entrepreneurs use the LoI to receive regulatory clearances and loans for their CBG projects. After the standing committee on petroleum and natural flagged the issue of LoIs, the oil ministry advised state-run oil and gas companies to review the selection criteria for LoI issuance “so that only serious applicants are selected and also to withdraw the LoIs issued to non-performing entrepreneurs,” the committee said in its latest report.

As of June 1, 2022, a total of 3,263 LoIs had been issued by the state oil companies, the committee said in its previous report tabled in December. Of this, only 35 CBG plants had been commissioned and around 40 plants were expected to be commissioned by March 2023, it said.

The Committee observed in its December report that the same entrepreneur/investor had been issued a large number of LoIs. “The committee have been informed by the entrepreneurs that the banks are not extending loans for more than one project to the entrepreneur who is holding multiple LoIs,” the report said.

“However, the Committee suspect that the PSUs had issued multiple letters of intents (LOIs) just to show that the targets under SATAT (scheme) are on course of being achieved as it is evident that the same entrepreneur will not get finance for different projects from banks without providing adequate security and guarantees,” the report said.

“The Committee deplore Ministry of petroleum and natural gas / PSU’s for such deceptive methods to mislead about the targets and show that the progress under SATAT is good,” the report said.The panel also recommended that state oil and gas companies set up CBG projects on their own. “The Committee feel that unless Oil and Gas PSUs shed their reluctance and come forward in investing in a few CBG projects, which can come out as an effective model, it will be difficult to persuade private entrepreneurs and investors to come forward and invest in the CBG Sector,” it said.

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