New Delhi: Amid talk of spinning off gas marketing business of GAIL India Ltd into a separate company, Oil Minister Dharmendra Pradhan on Tuesday said the state-run firm should focus on building natural gas pipelines as marketing can be done by "anyone".
Refusing to confirm or deny reports of government mulling splitting GAIL into two, he said creating infrastructure to take environment friendly natural gas to uncovered parts, particularly eastern India, is a priority for the government. Incorporated in August 1984 by spinning off gas business of ONGC, GAIL (India) Ltd owns and operates about 11,000-km of natural gas pipelines in the country. It sells around 60 percent of natural gas in the country.
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. "Nothing has been finalised yet but discussions are on," said a sources with direct knowledge of the development. Pradhan, on the other hand, said 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 Rs 5,176 crore, or 40 percent 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 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.
Sources said the petroleum ministry has not been very happy with GAIL's performance in building pipeline network. Besides, there is a possible conflict of interest in its role as a infrastructure provider and carrier.
GAIL did not start executing the Rs 12,940 crore JagdishpurHaldia and BokaroDhamra pipeline until the government agreed to give 40 per cent of the project cost as grant from the budget. The pipeline takes the gas to Prime Minister Narendra Modi's constituency, Varanasi. Plans to split the company had been discussed more than a decade back too but it did not materialise.
Sources 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 arms length, and hence do not need to be separated. GAIL's marketing business formed 71 per cent of its 2016 -17 total sales, and 25 per cent pre-tax profit. The government has a 54.89 per cent stake in GAIL India. Its current market cap is Rs 84,607.44 crore. "Is it not fair to expect gas pipeline to be laid to eastern India?," Pradhan asked.
Steel plants in Odisha, Jharkhand and Bihar would produce good quality steel when they get gas, he said. "High quality steel production in India is very less currently."
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