India Seeks Cabinet Nod to Split Gail

The Indian petroleum and natural gas ministry is seeking approval for hiving off state-owned gas utility Gail’s pipeline business into a separate entity for a possible sale to a strategic investor at a later date, Press Trust of India reported February 4, citing sources.

Gail is India's biggest natural gas marketing and trading firm and owns more than 70% of the country's 16,981-km pipeline network. Users of natural gas have often complained about not getting fair access to the company’s 12,160-km pipeline network to transport their fuel, Press Trust of India said.

The government is of the view that splitting the marketing and transportation business could resolve the conflict arising out of the same entity owning the two jobs. Gail's core business after the bifurcation would be the marketing of natural gas and petrochemical production. It will have to hire capacity on pipelines from the subsidiary and pay regulator approved traffics for the same, Press Trust of India said.

The cabinet, sources said, is likely to consider the proposal shortly. After the cabinet approval, a consultant will be appointed to transfer the pipeline business into a separate subsidiary. This could take eight to ten months to accomplish.

Sources said the pipeline subsidiary may be sold off to a strategic investor but the sale is not likely before 2022 as the thinking in the government is that the gas market will not be mature before that and state support would be needed for Gail to accomplish building a national gas pipeline grid, the news agency reported.