The Hindu Business Line : HPCL Kolkata gas supply plan hits hurdle

Kolkata, Dec. 11 Hindustan Petroleum Corporation Ltd’s (HPCL) plans to enter the city gas distribution in Kolkata through acquisition of controlling stake in State government controlled Greater Calcutta Gas Supply Company (GCGSC) and Coal India Ltd’s Dankuni Coal Complex (DCC), has hit the valuation hurdle.

Both DCC and GCGSC are loss-making.

GCGSC supplies piped coal gas manufactured by CIL at Dankuni in the industrial areas of the twin city of Kolkata and Howrah.

The company (GCGSC) is the post-Independence avatar of city gas distributor Oriental Gas Company and has an extensive 700 kms of pipeline network in the two cities.

Coal gas has very low methane content and is considered as an alternative to fuel oil.

Limited industrial use and high production and distribution cost of the gas has made the operations of both the Dankuni Coal Complex and GCGSC – together having nearly 1000 workers - unviable..

According to sources close to the development, HPCL wanted a majority stake in both the companies.

While GCGSC would have offered the gas distribution infrastructure, DCC would have served as a steady in-house source in the natural gas starved region.

In future, the company may have blended coal gas with other emerging sources like coal bed methane (CBM) or natural gas or LNG.

While on paper both CIL and the State government found the HPCL proposal encouraging, in reality the government and HPCL widely differed over the valuation of GCGSC.

While HPCL valued the company around Rs. 40 crore, government felt the valuation should be in excess of Rs 70 crore.

To resolve the differences, GCGSC has floated a global tender last week seeking an independent valuer.

Though discussions progressed substantially with CIL over the acquisition of controlling stake in Dankuni coal complex, the deal may not be firmed up if HPCL finds GCGSC to costly to acquire. DCC is valued at Rs 91 crore.

“We are waiting for HPCL to finalise the offer to approach the Union Coal Ministry with a formal proposal to sale controlling stake,” a senior CIL official told Business Line.

“We are now waiting for the valuation of GCGSC to be over following which we would take a call on acquiring these units,” a HPCL source said adding that a decision was expected within this fiscal.

More Stories on : Outlook | Petroleum | West Bengal | Hindustan Petroleum Corporation Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page