KOLKATA (miningweekly.com) – India’s Union Cabinet of Ministers is likely to consider splitting up operations of natural gas marketing and infrastructure major, GAIL India, but the sale of its pipeline business to a strategic investor has been put on the backburner for at least two years.
The Petroleum and Natural Gas Ministry has proposed splitting the natural gas marketing and transportation business verticals of GAIL India, as a precursor to setting up an Indian gas trading hub.
The Ministry would place before the Cabinet a proposal to transfer GAIL’s 11 551 km of natural gas transportation pipeline into a wholly owned subsidiary, while the gas marketing business would remain the exclusive domain of the parent. However, sources in the government said that neither the Ministry, nor the government was keen on the immediate sale of the wholly owned pipeline business subsidiary to a domestic or foreign strategic investor and that a final decision on this would be taken two or three years later.
The expected approval of splitting up GAIL India’s operations would pave the way for the Ministry to push ahead with its plans for setting up a natural gas trading hub in the country. The Ministry has been maintaining that having a near-monopoly in natural gas marketing, as well as transportation, risked conflict of interest in operating the trading hub.
Unbundling the business verticals of GAIL would preclude the possibility of gas trade participants complaining of denial of access to the gas transportation network, while GAIL would continue to remain a dominant player in import and marketing of gas at the same time.
While the Ministry has been pushing for setting up a gas trading hub since early this year, splitting up of GAIL businesses as a pre-condition to it faced opposition from within the gas infrastructure company. However, with GAIL director for business development Manoj Jain having been selected to take charge of the company as chairman and MD, the internal opposition was expected to wane, sources said.