GAIL may spilt up

As per news source, the Oil Ministry has put forward a cabinet note seeking for GAIL (India) Ltd's pipeline business into a separate entity for a possible sale to a strategic investor at a later date.

GAIL is the country’s biggest natural gas marketing and trading firm. It owns more than 70% of the country's 16,981-km pipeline network.

Users of natural gas have often complained about not 'fairly' getting access to GAIL's 12,160-km pipeline network to transport their fuel.

Bifurcating of GAIL is considered to resolve the conflict arising out of the same entity owning the two jobs. GAIL's core business after the bifurcation would be the marketing of natural gas and petrochemical production. It will have to hire capacity on pipelines from the subsidiary and pay regulator approved traffics for the same.

GAIL will carry on executing the gas sales agreements that it has signed. It will be responsible for the discharge of the obligation under purchase pacts including for import of LNG.

The Ministry last month floated a note for consideration of the Union Cabinet for transferring the pipeline business into a 100% subsidiary.

The proposal involves separating the accounts of the pipeline division as well as transferring employees directly connected with the pipeline operations to the new subsidiary, they said adding a suitable name for the subsidiary is being mulled over.

The Cabinet, they said, is likely to consider the proposal shortly.

After the Cabinet approval, a consultant will be appointed to transfer the pipeline business into a separate subsidiary. This would take 8-10 months to accomplish.

Sources said the pipeline subsidiary may be sold off to a strategic investor but the sale is not likely before 2022 as the thinking in the government is that the gas market will not be mature before that and state support would be needed for GAIL to accomplish building a national gas pipeline grid.