• Ministry has instructed GAIL to split its gas marketing and transmission business: Pradhan

    Oil and steel minister Dharmendra Pradhan on Tuesday said the oil ministry has instructed government-owned natural gas utility giant, GAIL, to form a plan to separate its gas marketing and transmission businesses.

    “Marketing and laying of pipelines or transmission are two different segments, the ministry has always been of the opinion that these two job functions being done by GAIL should be separated. Yes, we have told them to prepare a road map for this,” Pradhan told media yesterday. He added that as of now no timeline on the split has been decided.

    According to a news report by Bloomberg earlier this week, the oil ministry had approached the Cabinet for splitting the two businesses.

    Meanwhile, GAIL has appointed an international consultant to determine tax implications after the restructuring.

    The news report further added that the plan to carve the pipelines business into a fully-owned unit would bring greater transparency between the two businesses and might allow the government to sell shares at a later date.

    Many private, as well as government-owned companies, have in the recent past voiced concerns about GAIL being present in both the marketing and transmission business.

    D K Sarraf, chief of Petroleum and Natural Gas Regulatory Board (PNGRB), the country’s downstream regulator, in a recent interview told ETEnergyWorld that GAIL’s unbundling will resolve certain operational issues.

    “The government needs to take a call on it. Yes, there is a legitimate concern among many stakeholders on GAIL’s operation both in the marketing and transporting business. The government will have the final say in this and stakeholder inputs will obviously be taken. Yes, certain operational problems will be resolved by unbundling.” Sarraf told ETEnergyWorld.

    Ajay Shah, vice-president at Shell Energy Asia had earlier this year told ETEnergyWorld that for India to unlock its natural gas potential and increase its consumption the country would have to unbundle natural gas transmission and marketing services.

    “Countries like the US and Europe were able to increase the use of natural gas in their overall energy mix primarily due to unbundling of natural gas marketing and transportation services. While India does have open access to its pipeline and a regulator in place, the practical reality is that it is difficult to access natural gas pipeline infrastructure for a variety of reasons,” Shah told ETEnergyWorld in an interview.

    Last year, many companies had in their response to PNGRB’s proposal on unified tariff for inter-connected cross country pipelines had again raised concerns on GAIL’s operations.

    Indian Oil, Shell Energy Marketing and Trading as well as BP India were of the opinion that unification of tariff should only be done after legal unbundling of gas trading and transmission business has taken place and an Independent System Operator is set-up.

    GAIL in response to these concerns had said that unbundling was not related to the unification of tariff, which was a separate exercise and should be implemented on a standalone basis.

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