Explained: Why GAIL is abandoning its plans to apiary its pipeline activities

Written by Karunjit Singh, edited by Explained Desk | New Delhi |

Updated: Jun 12, 2021 13:19:15 pm

State-owned natural gas distributor and pipeline operator GAIL will not divest from its pipeline business, company and government officials say. Oil Minister Dharmendra Pradhan previously said the government was seeking to separate the two companies to resolve conflict of interest issues posed by the pipeline major. The Indian Express examines why the plan was proposed, the opposition it faced, and why it was ultimately scrapped.

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Why was the government planning to branch off GAIL?

GAIL owns and operates a 13,200 km pipeline network which represents over 70% of the total pipeline network in India, in addition to being a gas distributor as well. The government had maintained until the end of last year that it was working on a plan to separate itself from the company’s pipeline operations in order to address conflict of interest concerns of one of the most major pipeline operators are also a gas distributor.

What was GAIL’s reaction?

The plan met with strong opposition from GAIL executives who noted that the two companies kept the company’s finances stable, with the transportation activity acting as a stable source of income when the activity gas marketing was affected by fluctuations in international gas prices. GAIL officials also added that this financial stability would be a key factor in allowing GAIL to expand its pipeline network. The expansion of natural pipeline networks is a key step in the government’s plans to increase the share of natural gas in our primary energy mix to 15% by 2030, from around 6.2% currently.

Company officials also noted that there was still an underutilization of GAIL’s pipeline network and therefore there were no issues with lack of access to GAIL’s pipeline network or preferential treatment. granted to the natural marketing arm of GAIL compared to other companies. Officials also noted that they learned through an application from RTI that the Petroleum and Natural Gas Regulatory Board had not received any complaints about the preferential treatment granted by GAIL for its marketing activities.

Why did the government abandon the plan?

According to government officials familiar with developments, the announcement of an independent pipeline system operator in the EU budget removed the need for a fork in GAIL’s business. “An independent transmission system operator (TSO) will solve the problem of non-discriminatory access to GAIL’s pipeline network, as the TSO will be responsible for the reservation and allocation of pipeline capacity,” said a government official.

Officials said the government’s primary focus now is to ensure that GAIL is able to meet its pipeline network expansion goals and that GAIL will monetize its pipeline network to fund further expansion of its pipeline. pipeline network.

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