GAIL wants Rs 12,200 cr budgetary support for ambitious, multi-state gas pipeline project

India’s flagship natural gas transportation firm GAIL (India) has suggested the government meet the

entire estimated cost of Rs 12,200 crore to lay a 2,539-km pipeline connecting Uttar Pradesh, Bihar,

West Bengal and Odisha. The budgetary support has been sought by the public sector undertaking as it

is not confident of getting enough anchor customers for the pipeline — which the government wants to

build in order to boost natural gas availability in the country — to be economically viable.

The Phulpur-Haldia- Ranchi-Dhamra pipeline, earlier known as Jagdishpur-Haldia line, is to be completed

by 2018-19. It is expected to offer gas for revival of fertiliser units at Gorakhpur in Uttar Pradesh and

Barauni in Bihar.

Also Read: Improvement in GAIL’s earning seen in FY17, FY18: Jefferies

However, with GAIL’s existing pipeline network ferrying gas at less than 50% capacity and the concerns

over the costs have made the firm wary.

“GAIL has submitted a proposal seeking financial support for the pipeline. The government could

consider to offer budgetary support so that the gap between the investment and the minimum rate of

return for the pipeline could be bridged,” a senior petroleum ministry official told FE. GAIL implements

new projects expecting an internal rate of return (IRR) of at least 12%.

The petroleum ministry’s plan to offer viability gap funding for natural gas pipelines did not sail through

after North Block opined that such scheme does not cover the funding for the development of gas

pipelines.

“While we can confirm that phase I will be completed by December 2018, phases II and III completion

will depend on the fertiliser plants coming up in the region as well as the timing of the Dharma LNG

terminal,” BC Tripathi, chairman and managing director of GAIL, said recently.

The petroleum ministry official quoted above said that his ministry is in “active consultation” with North

Block to find a “viable model” to lay the pipeline shortly. Laying the pipeline and getting new consumers

is pivotal for GAIL as well to sell around 6 million tonnes of gas it would be importing from the US

beginning 2018. The pipeline, poised to make natural gas reach doorstep of every big and small gas

customers in the northern and eastern states, is proposed to be built in three stages — the first phase of

755 km (Rs 3,220 crore); second phase of 1,201 km (Rs 5,565 crore) and third phase of 583 km (Rs 3,425

crore). This would include the main and the spur lines (see graphic ).

NGS INDIA