FY12 subsidy to be 5-10% higher than in FY11, expects GAIL

Gas Authority of India (GAIL) has posted a net profit of Rs 1,094 crore for the July-Sep quarter of FY12, up 18.45% from the year-ago period. Sales of the company also rose 20% at Rs 9,699 crore.

BC Tripathi, chairman and managing director of the company expects to maintain transmission volumes at 120 mmscmd. Meanwhile, he also told CNBC-TV18 in an interview that the spot cargoes would aid in maintaining trading volumes.
However, Tripathi feels that the FY12 subsidy will be 5-10% higher than in FY11. The upstream subsidy is expected to be at 33% in FY12, he added. Here is the edited transcript of his interview. Also watch the accompanying video. Q: There is some disappointment on the gas transmission volumes. What do you expect to see on the gas transmission volumes in the second half of the year, both volumes and trading volumes?
A: In terms of transmission volumes, there has been a decline in domestic production. To that extent, we could not achieve the upsides in transmission. We have been able to make up the same with procurement of spot cargos.
We have been able to maintain the level of transmitting 120 mmscmd gas per day. There has been an upside in the trading as it has grown up from 79 mmscmd to 84-85 mmscmd today. Apart from supply from domestic source, we have been able to source the spot cargos. The supply level and transmission levels are being maintained. Q: Do you expect issues like D6 to be restraining factors to volume growth going forward? Will you be able to procure spot cargos in the second half and not affect transmission volume significantly?
A: If the domestic production would have been at par with our expectations, we would have seen further upside. We will be able to maintain through the import of spot cargoes either by us or other suppliers.
The transmission system capacity, which is expected to be over 120 mmscmd, we will be able to maintain at the annual level. Through the spot cargos, we will be able to increase our trading and trading margin on the spot business. Q: What are your thoughts on the subsidy that Gail has had to pay out? What kind of visibility do you have for the rest of the year?
A: This quarter, subsidy has been higher as compared to the previous corresponding quarter from Rs 340 crore to Rs 560 crore. On the overall annual level, the subsidy will remain by and large same for Gail. We will be able to maintain the profit level and show almost 15-20% higher growth on the annual basis, both in the turnover as well as profit. Q: How would it pan out for the other upstream companies? Will the one-third formula be honoured this year or will there be a relook?
A: As of now, the one-third formula will be honoured, but it