Government Plans Rs 5,400 Crore Funding To Northeast Gas Grid
A gas turbine stands inside the coal powered power plant operated by RWE AG in Lingen, Germany. (Photographer: Jasper Juinen/Bloomberg)

Government Plans Rs 5,400 Crore Funding To Northeast Gas Grid

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In only the second instance of providing funds for a gas pipeline, the government is considering shelling out about Rs 5,400 crore in viability gap funding for a proposed Northeast gas grid, officials said.

The 1,656-km North-East Natural Gas Pipeline Grid will connect Guwahati in Assam to major cities in the region such as Itanagar, Dimapur, Kohima, Imphal, Aizwal, Agartala, Shillong, Silchar, Gangtok, and Numaligarh.

However, in the absence of anchor customers, the Rs 9,000 crore pipeline is not economically viable. "A viability gap funding of 60 percent of the project cost has been sought," an official. The oil ministry is supporting the proposal and it is likely to be considered by the Cabinet soon, he said.

The Northeast pipeline grid is to be implemented by Indradhanush Gas Grid, a joint venture of state-owned GAIL (India) Ltd., Indian Oil Corporation Ltd., Oil & Natural Gas Corporation Ltd., Oil India Ltd. and Numaligarh Refinery Ltd.

The consortium has pitched for a 60 percent funding support from the government and would raise the rest via equity and debt, the official said. Without the government support, the pipeline would not be viable. This is a second time that a gas pipeline project in the country would be funded by the government.

In 2016, the government provided a capital grant of Rs 5,176 crore, or 40 percent of the project cost, of the 2,655-km Jagdishpur-Haldia and Bokaro-Dhamra gas pipeline project, which GAIL is currently executing.

GAIL is also laying a 750-km line from Barauni to Guwahati as part of the Rs 12,940 crore JHBDPL project, which is also known as the 'Pradhan Mantri Urja Ganga' project. This is proposed to be connected to the Northeast via the Indradhanush Grid. All other pipelines in the country have been funded by public or private sector companies. The official said oil companies will not be able to execute the Northeast grid project without the viability gap funding.

The project is critical towards implementing the government's Hydrocarbon Vision 2030 for Northeast. The Vision envisages the development of the region by leveraging its hydrocarbon potential, enhancing access to clean fuel and accelerating the growth.

This is a part of a broader goal of the government to raise the share of natural gas in the country's energy mix to 15 percent by 2030 from current 6.2 percent. The government has envisaged developing the National Gas Grid. At present, about 16,788 km natural gas pipeline is operational and about 14,239 km gas pipelines are being developed to increase the availability of natural gas across the country.

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