GAIL bifurcation put on hold

Kuwar Singh/Richa Mishra New Delhi | Updated on February 04, 2021

The government aims to expand the gas pipeline network to 34,000 km   -  VIJAYA BHASKAR CH

Focus to stay on building pipeline infrastructure

The Petroleum & Natural Gas Ministry has decided to go slow on a move to bifurcate GAIL (India) Ltd’s gas trading and infrastructure business into two. This is to ensure that it continues to focus on its core business of laying new pipelines.

“We are not bifurcating pipeline assets of GAIL because the company is in the middle of a huge asset creation,” a senior official said.

The government aims to expand India’s gas pipeline network to 34,000 km, out of which about 19,000 km has been completed.

“For now, we have a long way to go. We want to concentrate on getting these pipelines commissioned in time. Most of the pipelines under construction are GAIL’s. GAIL also has some joint ventures and subsidiaries which are in city gas distribution.

“As of now, the company is in big expansion mode. So we won’t disturb it,” the official said.

Stabilising new projects

Noting that a proposed bifurcation of the company could harm its balance sheet and ability to raise funds to finance the massive infrastructure projects, the official said, “GAIL has to raise money to build, manage and stabilise the new pipelines. Its ability to borrow and generate returns should not be hampered.”

The new gas pipeline project announced in the Union Budget for Jammu and Kashmir will be carried out via viability gap funding and will most likely be constructed by GAIL, the official added. “Private companies won’t be interested in this project naturally because there is not a large gas demand in Kashmir.”

Monetisation programmes

Gujarat Gas, the distribution company controlled by the State government, is already constructing a gas pipeline at Gurdaspur in Rajasthan, which will be extended upto Srinagar, the official said. Land acquisition for the project will take about 1-1.5 years, and a total of 4-5 years would go into completing the project.

As part of the government’s asset monetisation programmes, two pipelines of GAIL are initially being transferred to an InvIT, the official said, adding that it will allow the company to raise cash upfront, which will contribute towards funding for new infrastructure projects.

Private sector’s concerns

The concern of private sector companies over GAIL’s dominant presence in both the gas pipeline and marketing business has been assuaged by the budget announcement of a new gas transmission system operator (TSO), which will be set up as a separate government company, the official said.

“GAIL has the expertise and some people from GAIL may join the new TSO, but otherwise it will be independent. It will handle the booking and accounts of the spare capacity of the pipelines,” the official said.

Published on February 04, 2021

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