Govt decides to extend budgetary grants to Gail, GSPC

Move comes in a bid to speed up doubling the country’s gas transportation network over the next few years


Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

New Delhi: The government has decided to extend budgetary grants to Gail India Ltd and Gujarat State Petroleum Corp. (GSPC) to meet any shortfall in the cost of their pipeline projects, in a bid to speed up doubling the country’s gas transportation network over the next few years from 15,000km now.

The agreement between the oil ministry and the finance ministry to help pipeline projects reach financial closure, along with the planned revival of three fertilizer factories that will buy natural gas from Gail, will aid the expansion of the country’s gas highway which has made little progress in the last two years, said a government official who is involved in the discussions.

Problems relating to project viability, absence of anchor customers for natural gas along the pipeline and political opposition from southern states—Tamil Nadu and Kerala—had delayed India’s ambitious plan to expand the pipeline network. That situation is changing now.

“Reviving the state-owned fertilizer factories at Sindri in Jharkhand, Gorakhpur in Uttar Pradesh and Barauni in Bihar will provide anchor gas customers to the Phulpur (Allahabad)-Haldia pipeline project of Gail. The finance ministry has agreed to provide budgetary support to bridge the shortfall in covering the project cost of this and other pipeline projects,” said the official quoted above, asking not to be identified.

This project is divided into different phases and, once completed, will transport 16 million metric standard cubic metres of gas per day along a 1700km route, supplying fuel to industrial units and facilitating city gas distribution.

State-owned NTPC Ltd and Coal India Ltd announced setting up of a joint venture on 17 May to build new gas-based fertilizer units in the premises of Fertilizer Corp. of India’s (FCIL) Sindri and Gorakhpur units and Hindustan Fertilizer Corp. Ltd’s Barauni unit, which will help these ailing companies. Indian Oil Corp. is in the process of joining the project.

The ministries initially considered supporting the pipeline projects with viability gap funding, a scheme to provide capital support to infrastructure projects built through public-private partnerships, but instead decided to give direct budgetary support because finding a private partner will be time consuming, the official said. Grant from the government could be up to 35% or 40% of the project cost as per the requirement, said the official. An email sent to Gail on Wednesday remained unanswered.

A gas transportation network across the country is essential for enabling many fertilizer units to replace naphtha (a liquid hydrocarbon) with more efficient gas as feedstock and many power plants to move from diesel to the less polluting gas. Shifting to a gas-based economy is part of India’s climate change plan.

Part of the land acquisition problem for Gail in the south for its 884km Kochi-Koottanad-Bengaluru-Mangalore pipeline looks set to be solved with the new Left Democratic Front chief minister in Kerala, Pinarayi Vijayan, promising land use rights for projects of economic importance, including gas pipelines. Vijayan told Mint in an interview on 21 June that the state has limited land available and when people give it up for infrastructure projects, they have to be sufficiently compensated.

Gail only acquires the right to use land and returns it to the owner after laying underground pipelines. The owner gets a percentage of the market value of the land as compensation. A host of small industries along the pipeline’s route in Kerala, Tamil Nadu and Karnataka are expected to get clean fuel once the project is completed. Tamil Nadu still opposes about 300km of the pipeline which passes through the state.

Oil minister Dharmendra Pradhan said in an interview to Mint on 15 March that new terminals are being built at Ennore in Tamil Nadu, Kakinada in Andhra Pradesh and Dhamra in Odisha to re-gasify imported liquefied natural gas (LNG) which will boost availability of the clean fuel. The other gas transportation network being built will connect Ranchi to Paradip, Paradip to Surat and Mallavaram to Bhilwada. India produced 32 billion cubic meters (bcm) of gas and imported 21 bcm in 2015-16.

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