Bifurcation of state-owned natural gas company GAIL has been put on the back burner by the ministry of Petroleum and Natural Gas. The government was planning to split the PSU into two entities – one for gas transmission and the other for marketing business. Ernst &Young was given the responsibility of consulting for the same. The intent behind the proposal was to bring more transparency into the country's gas market.
According to a source aware of the development, the government does not want to hamper GAIL's ability to borrow funds for its massive expansion plans.
The company's plan is to double its pipeline network from around 16,000 to 34,000 km. The source added that the reason for holding the bifurcation was that a separated entity will not be able to raise funds at rates in which a combined balance sheet of GAIL can get.
Finance Minister Nirmala Sitharaman had announced in the budget that pipeline assets of IOC, GAIL, and Hindustan Petroleum Corporation Ltd (HPCL) will be monetized. GAIL may monetize some of its pipelines through instruments like Infrastructure Investment Trust (InvIT).
GAIL is India's biggest natural gas marketing and trading company. It contributes to over 70 percent of the country's pipeline network. Over the years, users of natural gas had complained over not getting ‘equal and fair access’ to GAIL’s pipeline. In order to solve this conflict coming out of the same entity handling both the businesses, bifurcation of GAIL was initially planned.
The government has laid a road map of increasing the share of natural gas in the country’s energy basket to 15 percent by 2030, from the current 6 percent. The expansion of pipeline network is considered to be vital in achieving this target.
