In the long run and with the maturing of gas markets, it is envisaged in the policy that the authorised entities will have transportation of natural gas as their sole business activity and will not have any business interest in the gas marketing or city or local gas distribution networks. Photo: Pradeep Gaur/Mint
In the long run and with the maturing of gas markets, it is envisaged in the policy that the authorised entities will have transportation of natural gas as their sole business activity and will not have any business interest in the gas marketing or city or local gas distribution networks. Photo: Pradeep Gaur/Mint

GAIL set up for natural gas transportation: Oil minister Dharmendra Pradhan

GAIL was established for transportation, processing and marketing of natural gas and for establishing and managing gas pipelines and related installations

New Delhi: Oil minister Dharmendra Pradhan on the issue of splitting gas utility GAIL on Wednesday said a decade-old policy provides for a natural gas transporter not having any interest in marketing of the fuel.

Pradhan gave the response in Rajya Sabha on a written reply to a question on splitting state-owned gas utility GAIL India Ltd by separating its gas marketing business from its primary role as a transporter of gas. Incorporated in August 1984 by spinning off gas business of ONGC, GAIL (India) Ltd owns and operates about 11,000km of natural gas pipelines in the country.It sells around 60% of natural gas in the country.

Pradhan said in 2006, the government issued the policy for development of natural gas pipelines and city or local natural gas distribution networks. “In the long run and with the maturing of gas markets, it is envisaged in the policy that the authorised entities will have transportation of natural gas as their sole business activity and will not have any business interest in the gas marketing or city or local gas distribution networks," he said.

Also, the policy and the provisions of the Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 provide for all entities authorised to lay pipelines including GAIL to provide mandatory open access to their gas pipeline infrastructure on common carrier principle at non-discriminatory basis.

This open access to third parties should be given at transportation rates determined by PNGRB, he said. The minister, however, did not say either ways if the government was considering splitting GAIL. GAIL, he said, was established for transportation, processing and marketing of natural gas and for establishing and managing gas pipelines and related installations.

At present, GAIL has about 11,000km long gas pipeline network and is also developing about 3,500km long pipelines projects in the country. Last month, Pradhan had stated that the state-run firm should focus on building natural gas pipelines as marketing can be done by “anyone".

He had stated that creating infrastructure to take environment friendly natural gas to uncovered parts, particularly eastern India, is a priority for the government. Several meetings have been held in the ministry on splitting GAIL by spinning off its marketing business into a separate company and selling it to a state-owned firm.

Pradhan had stated that the government has been taking steps to make India a gas-based economy. As part of this plan, it has even provided budgetary support of Rs5,176 crore, or 40% of the project cost, for laying of a gas pipeline from Jagdishpur in Uttar Pradesh to West Bengal, Jharkhand and Odisha. “This is the first instance of government funding a project from its budget," he had said.

GAIL, he said, should focus on creating infrastructure that would help take natural gas to all parts of the country, especially eastern India which has so far been unconnected. “Marketing can be done by anyone," he said, responding to a question on whether government proposes to split the state-run company’s pipeline and marketing businesses.

People in the know said refiners Indian Oil Corp. (IOC) and Bharat Petroleum Corp. Ltd (BPCL) have evinced in acquiring GAIL to expand their gas marketing business. One of the two companies could be sold the marketing business while GAIL asked to concentrate on just laying pipelines.

GAIL also owns a petrochemical plant at Pata in Uttar Pradesh which too could be sold along with the marketing business to either IOC or BPCL. The company had in the past resisted the split on grounds that its gas marketing and transmission businesses operate at arm’s length, and hence do not need to be separated.

GAIL’s marketing business formed 71% of its 2016 -17 total sales, and 25% pre-tax profit. The government has a 54.89% stake in GAIL India.

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