GAIL unlikely to be split, to let go petrochem business, says Pradhan

By: | Published: August 28, 2018 4:43 AM

In a reprieve for state-run gas marketer GAIL (India), the government is unlikely to split the company’s pipeline and marketing divisions, although it will have to pull out of the petrochemicals business.

The Centre was of the view that GAIL should focus on creating gas pipelines and not on marketing.

In a reprieve for state-run gas marketer GAIL (India), the government is unlikely to split the company’s pipeline and marketing divisions, although it will have to pull out of the petrochemicals business.

“GAIL will have to separate its marketing and pipeline businesses into two autonomous verticals and will have to maintain separate balance sheets,” said petroleum minister Dharmendra Pradhan on Monday while launching a portal to enable easy and transparent booking of common carrier capacity for transmission of natural gas through pipelines owned by GAIL.

Pradhan said the board of GAIL has taken cognizance of the fact that its primary responsibility is to create gas infrastructure in the country and the board has assured that the company will operate the two businesses at an arm’s length “without any conflict of interest”.

In January this year, on reports that GAIL might hive off its marketing business, Pradhan had said, “GAIL’s primary work has been prioritised as pipelines and marketing can be done by anyone, but a state company should concentrate on infrastructure. We expect GAIL to make gas infrastructure in the country at a fast pace.”

The Centre was of the view that GAIL should focus on creating gas pipelines and not on marketing.

GAIL has a pipeline network of 11,400 km in India accounting for three-fourths of natural gas transmission. It is also working to add another 5,000 km of pipelines which include the Pradhan Mantri Urja Ganga Project which will connect the eastern and the north-eastern states.

Pradhan said the return on investments made by GAIL should be retained and to that effect, the Petroleum and Natural Gas Regulatory Board will soon be coming out with a formula for tariff which will not only make the business model of GAIL viable, but will also ensure that the clean fuel remains inexpensive across the country.

Earlier, the premise for the company’s split was Section 21 of the Petroleum and Natural Gas Regulatory Board Act which provides the downstream regulator with the responsibility that infrastructure and marketing arms of state-run utilities should be separated and this can be implemented through regulations.

However, this requires the gas market to be mature and 15% of the energy mix should have gas. India’s gas usage is around 6.5% of total energy consumed.

Pradhan said the launch of the common carrier portal meant for need-based short-term usage of GAIL’s pipelines is a step towards establishing a gas trading exchange in the country. “We will be moving a Cabinet note soon for the gas trading exchange.

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