The Hindu Business Line : GAIL setting up separate unit for city gas distribution

“We have raised the authorised capital, which was the first step... the board will consider the bonus issue in two to three months.” – Mr U.D. Choubey

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New Delhi, March 11 GAIL (India) Ltd will set up a separate subsidiary for its city gas distribution (CGD) and compressed natural gas (CNG) corridor business.

Announcing this, the Chairman and Managing Director of GAIL, Mr U.D. Choubey, said that the yet to be named company will have an initial equity of Rs 200 crore and corresponding to this amount debt shall be arranged amounting to Rs 300 crore (considering 1.5:1 debt:equity ratio).

“The setting up of the subsidiary will also help in part for compliance of requirement of unbundling of the business for GAIL which may come in future. The formalities for registering the company and commencement of business have also been initiated,” he said.

To begin with, 17 cities have been identified for such projects entailing an initial investment of Rs 500 crore by 2012. The subsidiary company will take up distribution and marketing of CNG as fuel for vehicles (inter-city as well as intra-city), piped natural gas for domestic/commercial/ industrial purposes and auto LPG as fuel for transport vehicles in various cities in India and abroad, he said.

Mr Choubey said that the existing joint venture companies for such projects like Indraprastha Gas Ltd (IGL) for Delhi and Mahanagar Gas Ltd (MGL) for Mumbai, will continue to operate. He, however, did not rule out the possibility of transferring GAIL’s interest in the existing joint ventures and other such companies to the new subsidiary.

The new subsidiary will also form alliances with gas producers/strategic partners for implementation of the city gas projects as per the strategic decisions taken by GAIL. He said the subsidiary company will also take up investment in and setting up of infrastructure in various cities and along the national highways for building CNG corridors which includes, among others, natural gas compressor stations, laying of the pipelines from city gate station(s) to the consumption areas and associated facilities, setting up of distribution points/retail outlets for CNG/auto LPG and transport gas through mobile cascades/lorries. The new subsidiary will also carry out allied retail business activities at CNG/auto LPG retail outlets within the cities and along the highways.

GAIL is also studying the feasibility of setting up a joint venture with private pipe manufacturing companies for manufacture of pipelines and laying. “The Board has asked us to prepare a feasibility report and then it will take a decision,” he said.

Mulls bonus issue

GAIL (India) Ltd will consider issuing bonus shares in two to three months, Mr Choubey said. “We have raised the authorised capital, which was the first step... the board will consider the bonus issue in two to three months,” he said.

GAIL has raised its authorised share capital to Rs 2,000 crore from Rs 1,000 crore. He said the company has planned a capital expenditure of Rs 4,200 crore for the year ending March 2009, up from Rs 2,300 crore this fiscal.

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