East India to be part of gas grid

Gail will receive govt funding of Rs 5,176 crore to partly meet the project cost of the gas pipeline connecting the eastern part of the country with the national grid


Oil minister Dharmendra Pradhan said the import terminal could eventually supply gas to Bangladesh and Nepal too by laying pipelines. Photo: Mint
Oil minister Dharmendra Pradhan said the import terminal could eventually supply gas to Bangladesh and Nepal too by laying pipelines. Photo: Mint

New Delhi: India on Wednesday took a decisive step towards integrating the hitherto neglected eastern part of the country into the emerging gas economy—which by definition is environmentally friendly.

Accordingly, the union cabinet signed off on funding the project which will entail laying of 2,500 km long as pipeline—extending through Uttar Pradesh, Jharkhand, Bihar, Odisha and West Bengal—at an estimated cost of Rs.12,940 crore.

Together with the proposed LNG terminals to be set up in the region, it will create a natural gas supply infrastructure. Not only will it provide a green fuel to the region, which is endowed with a massive coastline, it will also cater to industries and transportation systems.

State-owned Gail (India) Ltd will receive central government funding of Rs.5,176 crore to partly meet the project cost of the gas pipeline connecting the eastern part of the country with the national grid.

The central funding, about 40% of the total project cost of Rs.12,940 crore, will come from the oil industry development cess collected on crude oil production, according to an official statement.

The pipeline connecting Jagdishpur in Uttar Pradesh, Bokaro in Jharkhand, Dhamra in Orissa and Haldia in West Bengal, will be used to supply natural gas to three fertiliser companies to be revived as per a plan approved earlier by the cabinet, oil minister Dharmendra Pradhan said at a briefing following the meeting chaired by Prime Minister Narendra Modi.

Fertiliser units at Sindri in Jharkhand, Gorakhpur in Uttar Pradesh and Barauni in Bihar, the main gas customers of the pipeline project, will benefit from the clean fuel which will be used to produce urea, the most commonly used plant nutrient in the country.

In an earlier interview to Mint, the oil minister had detailed the plans for expanding the gas economy to East India, saying, “We are building three more LNG terminals in the eastern coast at Ennore in Tamil Nadu, Kakinada in Andhra Pradesh and Dhamra in Odisha. We are also expanding our gas pipeline network. Four new gas highways from Jagdishpur to Haldia, Ranchi to Paradip, Paradip to Surat and Mallavaram to Bhilwada are being built.”

Later on Wednesday, state-owned Indian Oil Corp. and Gail (India) Ltd. agreed to take 50% stake in a five million tonne LNG terminal that the Adani group is set to build at Dhamra Port in Odisha at a cost of Rs.6,000 crores. Indian Oil will invest about Rs.700 crores for 39% in the project, while Gail will bring in about Rs.200 crore for 11%.

The project will raise the country’s gas import capacity to 26 million tonnes a year. Pradhan, who was present on the occasion, said investments into the pipeline network including city gas distribution facilities, the LNG terminal and revival of the fertilizer units in the region will result in an investment of Rs.52,000 crore in this region over the next few years. The minister also said the import terminal could eventually supply gas to Bangladesh and Nepal too by laying pipelines.

Mint had reported on 30 June that budgetary grants will be given to companies such as Gail India Ltd to meet any shortfall in the cost of their pipeline projects in a bid to speed up doubling of the country’s gas transportation network over the next few years from 15,000 km now.

The cabinet committee also cleared a plan to develop city gas distribution (CGD) networks in Varanasi, Patna, Ranchi, Jamshedpur, Bhubaneswar, Kolkata and Cuttack, which will be fed by the Jagdishpur-Haldia pipeline. These city gas projects will be executed by Gail India in association with the state governments concerned.

About 1.25 crore people in these cities are expected to get gas from these networks, the statement said, adding that the project will create about 21,000 jobs.

Public intervention is required in parts of the country for reasons such as backwardness, geographic disadvantage or strategic importance of being border areas, said Dharmakirti Joshi, Chief Economist at credit rating agency Crisil Ltd. “In hill states, for example, cost of doing business is high. The North Eastern region has a long border. It is desirable that there is a public intervention in certain regions, not by giving subsidies but by creating opportunities,” said Joshi.

A hydrocarbon vision brought out by the Modi government in February intends to bring Rs.1.3 trillion in public and private investments in the north-eastern region to double oil and gas output in the next 15 years. The country produces about 223 million tonnes of petroleum products and 33 billion standard cubic metres of natural gas a year.

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