Oil Ministry moves Cabinet note for splitting India's biggest natural gas firm

The Oil Ministry has moved a cabinet note seeking approval for hiving off India’s biggest natural gas firm GAIL (India) Ltd’s pipeline business into a separate entity. The split unit would be sold to a strategic investor later, sources privy to the development said.

GAIL, which owns more than 70 per cent of the country’s 16,981-km pipeline network, has a monopoly position on the market.

Natural gas users have often complained about not fairly getting access to GAIL’s 12,160-km pipeline network to transport their fuel.

According to sources, the bifurcation of GAIL is being 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.

The firm will continue to execute the gas sales agreements it has already signed and will be responsible for the discharge of the obligation under purchase pacts including for import of LNG.

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

GAIL will continue to own the marketing business as also the stakes in liquefied natural gas (LNG) terminals after the split, they said.

Previously, the government was considering transferring marketing business into a separate subsidiary for a sell-off at a later date but now a hive off of the pipeline business is being considered.

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The company had in the past resisted the split on grounds that it’s gas marketing and transmission businesses operate at arm’s length and hence do not need to be separated.

GAILs marketing business formed 76 per cent of its 2018-19 total sales and about 30 per cent pre-tax profit.

The government has a 54.89 per cent stake in GAIL India.

(With inputs from agencies)