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GAIL Says Split the Company When Gas Market Matures

The Petroleum Ministry is looking at splitting GAIL into two firms to resolve the conflict of interest in it being both the transporter and marketer of natural gas.


Updated:May 24, 2018, 11:22 PM IST
GAIL Says Split the Company When Gas Market Matures
File Photo.

New Delhi: Facing a prospect of being split into two, GAIL India on Thursday said it supports reforms like unbundling of gas marketing and transportation business but such a move globally has been done only after gas market has matured.

In a point by point rebuttal to critics, its Chairman and Managing Director B C Tripathi said GAIL is the only company in the country that has built multiple gas pipelines in last one decade while the private sector even after getting authorisation has not laid an inch.

Also, it has thrown open all of the 11,400-km of pipeline length to third parties for accessing on common carrier basis, he told reporters here.

In mature markets, monopoly gas transporting and marketing companies have been unbundled or split after the share of natural gas in energy mix has reached at least 15 per cent and a well-connected pipeline network built. Also, domestically produced natural gas forms bulk of consumption.

In India, the share of natural gas in energy mix is 6.2 per cent, its eastern and southern parts are not connected to any pipeline and domestically produced gas makes up for just 40 per cent of the consumption.

The Petroleum Ministry is looking at splitting GAIL into two firms to resolve the conflict of interest in it being both the transporter and marketer of natural gas.

While the ministry feels it hasn't done enough to lay pipelines, some industry players have sought access to GAIL's vast pipeline network for transporting their own gas.

Tripathi replied to both the counts by emphatically stating that "every inch of the pipeline built in the country in last few years has been by GAIL alone" and 120 entities are already using 25 per cent of the company's pipelines on common carrier basis.

GAIL also insists that it operates the two business at arms length principle and hasn't ever tried to use its monopolistic situation for undue commercial gains.

"Going forward, we will come up with a portal where capacity on our pipelines can be booked transparently," he said adding the company website already shows third-party access being given to all its pipelines on common carrier principle basis.

GAIL, he said, is a supporter of all reforms - be it the creation of a gas trading hub or unbundling.

"Unbundling can be done once the market matures," he said.

GAIL owns most of India's gas pipelines and more than two-thirds of the gas. The proposal under consideration is to split the firm into one gas marketing company and one company operating pipelines.

It is expected that GAIL will be allowed to retain its marketing business and the pipeline operations is to be hived off into a separate company with a view to encouraging gas use instead of dirtier fuels such as diesel and naphtha.

GAIL was created in 1984 by hiving off gas business out of ONGC. ONGC was producing oil and gas, and also transporting it. GAIL was hived off from ONGC for transportation of natural gas, and then slowly it also acquired the activities relating to the marketing of gas.

It is said that there is some conflict of interest between the same entity that carries out transportation of natural gas and also markets it.

Over a period of time, more players have come into gas marketing. Gujarat government entity GSPC is a major player in gas marketing and also in gas transportation. Reliance Industries also markets gas while a group affiliate owns the pipeline.

The government has 54.89 per cent stake in GAIL India.

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