GAIL Begins Process To Hive Off Pipeline Business Into Separate Unit
India’s largest gas distributor has begun the process to transfer its pipeline business into a separate subsidiary, paving the way for its share sale in the future, a senior company executive told BloombergQuint.
GAIL (India) Ltd. has received approval of Ministry of Petroleum and Natural Gas to form a wholly owned subsidiary, a pure transmission enterprise, the official said on the condition of anonymity. The process, the executive said, could take as much as four years to complete and would start only after the listing of GAIL Gas Ltd., the city gas distribution arm.
GAIL has yet to respond to BloombergQuint’s emailed queries.
The government has been taking appropriate decisions from time to time to bifurcate the marketing and gas transmission businesses of GAIL, Petroleum Minister Dharmendra Pradhan had said in response to a Lok Sabha query in November. The plan to carve out the pipeline business into a fully owned unit, according to Pradhan, would bring greater transparency in offering infrastructure and help the government to monetise it later.
Motilal Oswal Financial Services Ltd. in August had said that while separating the transmission segment from marketing was inevitable, the pipeline business might not survive independently. “The best alternative is to carve the transmission segment as another subsidiary of GAIL,” the brokerage had said in a report.
Incorporated in August 1984 by spinning off the gas business of Oil and Natural Gas Corporation Ltd., GAIL owns two-third of India’s operating gas transmission network. The pipelines operation accounts for close to 40 percent of its earnings. Revenue from the company’s natural gas and LPG transmission business stood at Rs 5,882.66 crore in 2018-19 compared with Rs 5,539 crore a year ago.
GAIL operates around 12,200 kilometres of natural gas and 2,038 km of LPG pipelines across the countr, and is investing more than Rs 45,000 crore to expand its network. In 2018, the company also allowed third parties to hire its pipeline for transporting natural gas.
The average gas transmission rose to 107.43 million metric standard cubic metre per day in 2018-19 from 105.23 mmscmd in the previous financial year. It’s Jamnagar-Loni and Vizag-Secunderabad pipeline achieved a throughput of 3.97 million metric tonnes per annum in 2018-19 against 3.72 MMTPA in the previous year.