KOLKATA (miningweekly.com) – Gas logistics and transportation major GAIL India has sought full government funding of $1.82-billion for the construction of a 2 539 km gas pipeline that will run through the northern and eastern Indian provinces.

According to an official in the Petroleum and Natural Gas Ministry, GAIL had claimed full government budgetary support for construction of the pipeline, as the difference between investment from its own funds and the internal rate of return (IRR) from the project could not be bridged without concessional funding.

The official noted that the pipeline project, which would run through the northern Indian province of Uttar Pradesh and the eastern Indian provinces of Bihar, West Bengal and Odisha, would connect key gas consumption centres Phulpur, Haldia, Ranchi and Dhamra and was critical for government’s plans to revive defunct fertiliser plants at these locations.

He added that, while the government had a specific Viability Gap Funding scheme for infrastructure projects, the gas pipeline did not specifically qualify for funding under the scheme.

As per GAIL’s standards, the company’s investments were benchmarked to a minimum 12% IRR from projects, though this project would not offer such a return without government financial support, said the official.

He added that, under the circumstances, the Petroleum Ministry was in talks with the Finance Ministry to devise a GAIL-specific funding model so that the project did not miss construction timelines.

The pipeline would be implemented over three phases, with the first phase scheduled for completion by 2018. This phase would have a capacity of 16-million metric standard cubic meters a day which would be ramped up to 32-million metric standard cubic meters a day on completion of the entire pipeline.

Significantly, the pipeline project had been conceived more than ten years ago, in 2004/5, but GAIL had delayed implementation as it was unsure of natural gas demand along the pipeline hinterland, as no gas consuming projects had been finalised then.

Subsequently, however, the Indian government had drawn up a master plan to revive defunct fertiliser plants that had been forced to close down decades ago as they faced a shortage of feedstock.

The defunct fertiliser plants due to be revived along the GAIL pipeline included Gorakhpur, in Uttar Pradesh; Barauni, in Bihar; Sindri, in Jharkhand; and Durgapur and Haldia, in West Bengal.