Gail plans city-specific joint ventures

Gas Authority of India Limited, Gail , plans several city-specific joint ventures as part of its growth strategy According to Prashanto Banerjee, Chairman and Managing Director of Gail, the company resulting from the venture would be a private company, though the government and PSUs will be stakeholders.

He said, "Typically, we are looking at city specific JV companies on the lines of Indraprastha Gas Limited in Delhi, Mahanagar Gas Limited in Mumbai, and Bhagyanagar Gas Limited in AP. The equity structure is as follows, 50% is government ownership where two PSUs like Gail and an oil company like IOC, BPCL, HPCL or IBP takes about 22.5% each. 5% stake is given to a state government enterprise, and all equity beyond 50% is either with financial institutions, or in the retail market. In other words, the resultant company is a private company, which is a standalone company for CNG, and piped natural gas."

Gail is also looking at the debt route for expansion. Banerjee clarified that Gail will need to put in capital for only part of the venture, and said, "These companies would require only 22.5% equity infusion by Gail. Debt is generally readily available..."

Banerjee said Gail would expand operations in cities strategically placed around the gas transmission pipeline. "We will be, on priority, taking those cities that are close to the trunk gas transmission pipeline. For instance, we have cities like Lucknow, Kanpur, Agra, and Bareilly in UP, Indore and Gwalior in MP, Kota in Rajasthan, and Pune in Maharashtra, which happen to be in the cachment area of the main trunk HBJ, Dahej Vijaypur and Dahej Uran pipelines of Gail," he said. 

Gas transmission contributes nearly 72% - of the company's revenues. Its current pipeline spans more than 6500 km, and it has been nominated carrier to transport gas from ONGC and other PSUs.

Gail also recently entered into a joint venture with Tripura Natural Gas Company, TNGC, which will distribute gas for retail in Tripura. Gail will hold a 29% equity stake in the venture. The company is upbeat about the prospects of the expansion.

Banerjee said, "We are taking about 29% equity in TNGC. The government of Tripura had decided in May 2004 that all marketing of natural gas in the state would be done by TNGC. We are looking forward to natural gas being supplied as CNG to automotives, domestic, industrial and commercial sectors. This is an exciting opportunity, and we are looking forward to growing this business."

Gail may participate in the national gas grid

Gail has also expressed willingness to vie for various segments of national gas grid, if they were thrown open for bidding. "In the event that the different segments of the national gas grid as per policy are thrown open for bidding, Gail will be very happy to participate in the process. We are confident that our cost will be most competitive, and our tariff will be best for consumers. We have prepared ourselves for a competitive situation in the development of natural gas infrastructure," Banerjee said.  

The Rs 20000 crore (Rs 200 billion) natural gas grid, to span 7000-8000 km, will be built in stages, and linked to the commercial availability of gas.

Banerjee is also optimistic about the outcome of the cabinet policy on gas price deregulation. "The gas pipeline policy that is being formulated by the government does take on board views of a large number of affected parties, including Gail...We will comply with the government. However, in the interim, we have been pointing out what we believe is rational for a national gas grid in the country followed by the rationale for a single agency model to be adopted and why Gail should be in this particular agency. We have been talking to opinion makers and have made presentations to the government. We shall continue to be optimistic of the outcome of the policy," he said.

Tsunami has not affected Gail establishments

Banerjee also clarified that there has been no damage to Gail's establishments in the tsunami hit regions. "We have a small installation in Nagapattinam. But none of our installations or personnel have been affected by the unfortunate episode," he said.