Mumbai: Awholly owned subsidiary of GAIL (India) Ltd, GAIL Gas Ltd is aiming to earn Rs150 crore in revenue in the next two years by expanding its network of natural gas distribution in cities.
The two-year-old firm, which currently distributes only in Dewas, will become operational in Sonepat from next month. Kota and Meerut will follow, chief executive M. Ravindran said on Wednesday.
GAIL Gas will also bid for more cities. “The next round of bidding will start within a month; 30-odd cities are expected to be up in the next couple of months,” Ravindran said. “We have already earned Rs3 crore in the first year, we expect Rs50 crore to Rs100 crore in the coming year, which could go up to Rs150 crore in two years.”
The company has set aside Rs450 crore for capital expenditure over the next five to seven years.
It will also re-invest earnings into new projects, as mandated when it was launched in May 2008. This, says the firm’s website, will reduce the need for fresh equity infusions by the parent company.
Some 160 million cu. m of gas is sold in India daily, of which vehicles use only two million cu. m, said GAIL India’s executive director J. Vasan. “So there is a lot of scope for demand to go up.”
“City gas distribution is an emerging sector with immense opportunities given the household potential to move from LPG (liquefied petroleum gas, which comes in cylinders) to piped gas and also the shift of diesel and petrol vehicles because of price and environmental factors,” said Akhil Sambhar, associate director (oil and gas) at audit and consulting firm Ernst and Young.
State-run GAIL India, the country’s largest gas transport company, has two main joint ventures (JVs) with Indraprastha Gas Ltd and Mahanagar Gas Ltd for gas distribution in cities, and four JVs with other companies. GAIL Gas does not compete with the JVs of its parent company, Ravindran said.
But there is plenty of competition that GAIL Gas faces in the city gas distribution business, primarily from Bharat Petroleum Corp. Ltd,Hindustan Petroleum Corp. Ltd, Reliance Industries Ltd and Cairn India Ltd.