The Hindu Business Line : GAIL set for unbundling of marketing, transmission biz

Gearing up
The company, which once enjoyed monopoly in the segment, is now facing competition.
Through its joint ventures it has already established the city gas business in several cities.

New Delhi , Dec. 26

State-owned gas marketing and transmission company GAIL (India) Ltd has prepared itself to meet the requirements of the recently announced Policy for Development of Natural Gas Pipelines and City or Local Natural Gas Distribution Networks, which calls for unbundling of marketing and transportation entities at an appropriate time.

A senior GAIL executive told Business Line, "As a proactive step in this regard, GAIL has already effected accounting separation of the gas transmission and marketing businesses, and will comply with the requirements of the regulator on the issue."

For the last three financial years, the company has been maintaining separate accounts (2003-04, 2004-05, and 2005-06) for the two. Asked whether the company would be dividing the two businesses into separate entities or whether it would be operating as two divisions of GAIL, the executive said, "It is too early to comment."

The company, which once enjoyed monopoly in the segment, is now facing competition from Gujarat Gas, Adani Energy Ltd, Assam Gas Company Ltd, and GSPCL.

Waiting in the wings are Mukesh Ambani-led Reliance Industries Ltd, and an Anil Ambani Group company.

On whether growing competition and announcement of the policy would change GAIL's strategies in pursuing city gas projects, the executive said, "as of now, no major change is foreseen."

GAIL, through its joint ventures has already established the city gas business in cities such as Mumbai, Delhi, Vadodara, Vijayawada, and Kanpur. So far, GAIL has formed eight joint venture companies including Mahanagar Gas Ltd, Indraprastha Gas Ltd, Bhagyanagar Gas Ltd, Tripura Natural Gas Company Ltd, and Central UP Gas Ltd among others.

Besides, the company is in the process of forging joint ventures with oil marketing companies for implementation of projects in Rajasthan, Gujarat, West Bengal, Kerala and Karnataka.

On the kind of investments GAIL is looking at for city gas projects, he said, there are several factors influencing the cost including area, population and automobile density. However, the approximate project cost for a city is around Rs 500 crore, where there is an estimated demand of approximately one million standard cubic metre of gas.

Cities identified

GAIL has identified major cities across the country based on the Supreme Court orders and `business fit' cases.

The names of the cities include Agra, Pune, Patna, Varanasi, Ahmedabad, Hyderabad, Bangalore, Chennai, Kolkata, Bareilly, Rajahmundry, Vijayawada, Vadodara, NCR cities (Gurgaon & Noida), Mathura, Gwalior, Indore, and Kochi. While the implementation of the projects in these cities is linked to availability of gas, he said the projects are expected to be implemented by 2009.

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