Pradhan rules out splitting GAIL but wants petrochem biz divested SAIL scouting for site in 3 states to set up `5,000 cr steel plant

NEW DELHI: Oil Minister Dharmendra Pradhan on Monday ruled out separating GAIL'S gas transportation and marketing businesses but said the state-owned gas utility should divest its non-core petrochemical business at a good price.

To resolve the conflict arising out of the same entity owning the two jobs, GAIL will bifurcate the accounts and give outside parties access to its vast pipeline network.

"GAIL board has considered the issue and has assured that it will operate the two businesses of gas transportation and marketing independently and autonomously," Pradhan said.

He was speaking at the launch of the company's online portal for common carrier capacity booking by marketing entities and consumers for transportation of natural gas through its pipelines.

Splitting GAIL "is not on the government's agenda," he said adding his ministry wants efficiency in operations of the company.

Pradhan said GAIL was formed with the objective of building pipelines and over the past three decades has also become major marketer of gas.

Pipelines are crucial for taking natural gas to consumers across the country. Currently, the pipelines are concentrated in western and northern part of the country only.

"GAIL has to concentrate on pipeline laying. It is unacceptable that they neglect pipeline for marketing and petrochemicals," he said. "It is unacceptable that they dress up their balance sheet with margins earned from gas marketing and petrochemicals."

Later talking to reporters, he said the company board has deliberated on the issue and agreed to separate balance sheets of the two businesses as also operating the pipelines on transparent basis by giving third party access.

Petrochemicals is "noncore business" of GAIL, he said. "GAIL should exit petrochemical business when they get a good price."

GAIL, he said, has to perform and fulfil the aspirations of taking gas to every nook and corner of the country.

There is an estimated 30 million standard cubic meters per day of natural gas that cannot be produced now because of lack of pipeline infrastructure to take the fuel to the consumers, he said.

India's current domestic natural gas production is around 70 mmscmd.

Pradhan said GAIL will separate balance sheets of marketing and transportation business.

This would mean that if GAIL were to sell gas to a consumer, its marketing division will have to enter into an agreement with the unit owning and operating the pipelines on the same terms and tariffs as being offered to outside third parties.

The oil ministry has been for last few months considering bifurcating GAIL'S businesses to resolve the conflict of the same entity doing both the jobs. One of the reasons for this was some industry players alleging that GAIL was not giving them access to its 11,000-kilometer pipeline network to transport their gas.

GAIL Chairman and Managing Director B C Tripathi said GAIL gave first open access to its pipelines in 2004 when four companies booked capacities. Today, there are 115 consumers using GAIL pipelines, he said.

The ministry had in January stated that it is considering to split GAIL into two - one for laying pipelines and the other for marketing and petrochemicals - to encourage more transparency between the two operations.

This is because it believed that all entities authorised to lay natural gas pipelines including GAIL have to "provide mandatory open access of its gas pipeline infrastructure on common carrier principle at the nondiscriminatory basis, at transportation rates determined by the Petroleum and Natural Gas Regulatory Board (PNGRB)".

Citing a 2006 policy, it stated that in the long run with the maturity of gas markets, the authorised entities should have transportation of natural gas as their sole business activity and not have interest in gas marketing or city gas distribution network.

GAIL is the country's biggest gas marketing and trading firm and owns most of the country's pipeline network. NEW DELHI: Steel PSU SAIL is considering locations in three states of Gujarat, Andhra Pradesh and Maharashtra to set up Rs 5,000-crore autograde steel plant in joint venture with Arcelormittal, Steel Minister Chaudhary Birender Singh said on Monday.

"SAIL people say that there are three places they can consider for putting up that plant. One is Maharashtra, another one is in Gurajat and third is in Andhra (Pradesh)," the steel minister said.

The proposed plant would be set up in one of these three states, he told reporters after the release of the corporate sports policy for central public sector enterprises under the steel ministry.

The auto-grade steel plant project with a capacity of 1.5 million tonnes per annum (MTPA) will be scaled to 2.5 MTPA, he added.

"A meeting was held about a month back which was attended by (Lakshmi Niwas) Mittal of Arcelormittal and SAIL people. In that meeting both the parties agreed on one thing that the details will have to be worked out for finalisation of JV (joint venture)," the minister said.

According to official sources, negotiations were still underway with regard to detailed technical agreements of the joint venture.

Domestic steel giant SAIL in December last year announced that its board had approved a proposal to enter into a joint venture with the world's largest steelmaker Arcelormittal for manufacturing high-end automotive steel.

The PSU had also said that definitive agreements in that regard would be finalised in the due course subject to financial viability.

SAIL and Arcelormittal had entered into an MOU in May 2015 to explore the possibility of setting up an auto-grade steel manufacturing facility under a joint venture in India.