Monday, September 26, 2022

Is GAIL going under the knife?

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New Delhi: Chasing a disinvestment target of Rs 1.05 lakh crores for the current financial year, the government is looking to split Gas Authority of India Limited (GAIL) by hiving off its pipeline business into a separate entity and offer a majority stake in it to strategic investors, sources aware of the development have said. They added that another reason that drove the government to take this decision was that users of natural gas had often complained about not getting access to the public sector undertaking’s 11,551-km pipeline network to transport their own fuel. GAIL owns more than two-thirds of the country’s 16,234-km pipeline network and has a stranglehold over the domestic market. Sources said that in order to resolve the conflict arising out of the same entity owning the two jobs, the Centre is considering bifurcating the state-owned enterprise.

Change of plans

While the government was previously considering selling off the marketing business to another state-owned company, it is now planning to put GAIL’s pipeline business on the shelf. GAIL is now expected to continue with the marketing business that would include all the sale contracts and the city gas retailing.

Pipeline business could go to Canadian asset management firm

Sources said that the pipeline business could be spun off into a separate entity, where the government may divest a majority stake to a strategic investor like the Canadian asset management company, Brookfield. This company has recently purchased a 1,480-km pipeline owned by Mukesh Ambani’s Reliance Industries (RIL). According to sources, the strategic partner would operate the pipeline business and give access on a non-discriminatory basis to any entity that wants to transport gas either from a natural gas field or an LNG import terminal to consumers.

Unbundling GAIL would push gas’ share in energy mix?

The government is hoping to push the share of natural gas in the country’s energy mix to 15 percent of the energy mix by 2030 from the current 6.2 percent and believes that unbundling GAIL and opening up the sector would be a step in that direction. GAIL already maintains separate accounts for its gas pipeline and marketing businesses and this is likely to make it easier for the government to split the PSU.

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