Is the Kolkata-Jagdishpur pipeline choking out rivals?

Is the Kolkata-Jagdishpur pipeline choking out rivals?

In a liberalised environment, the government is expected to promote competition. Public spending in

infrastructure creation is welcome, but only if the private sector is not forthcoming. Has this golden rule

been given the go-by in the plan to bring gas to Kolkata?

Recently, Oil Minister Dharmendra Pradhan announced plans to depute state-owned GAIL (India) Ltd to

lay a natural gas grid connecting Kolkata to Jagdishpur in UP.

Pradhan also announced that the Centre would give 40 per cent viability gap funding to lay the pipeline

(at an estimated cost of ₹12,000 crore). In other words, the Centre assumes that bringing gas to Kolkata is

not a viable option and that no one is interested in laying the pipeline.

Since no such proposal was ever put out for bidding and there is no reference to a market study, one

concludes that the Centre decided to spend the estimated ₹4,800 crore (40 per cent of the project cost)

of public money, to insulate the PSU from competition.

Strange proposal

The gas grid proposal itself raises eyebrows. In 2007, the Petroleum ministry authorised GAIL to lay a

2,000-km pipeline from Jagdishpur to Kolkata.

That was before the Petroleum and Natural Gas Regulatory Board came into being. The project was not

taken forward. Nine years later, GAIL is to now “reconfigure” the project.

The new pipeline project will start from Phulpur in UP (already connected by GAIL) and travel 755 km

south-west to Gaya in Bihar.

From there, it will go 1,200 km southward, through the industrial zones of Jharkhand, to the Dhamra port

in Odisha where the Adani Group is planning an LNG terminal. In the final run, the pipeline will travel 583

km north to West Bengal.

It’s a curious proposal. A closer look will show that GAIL is proposing to build a triangular grid, with the

Dhamra Project of Adani as the only, or major source of supply. This is very different from the earlier

project that aimed to supply gas from Jagdishpur to Kolkata.

“Then why call it Jagdishpur-Haldia pipeline. Do you go to Srinagar from Delhi via Chennai? And how do

you know there is lack of interest in pipeline projects connecting Dhamra to either Ranchi, Bokaro or

Kolkata?” asks an industry watcher.

Overlapping projects

Indeed, going by the available details on the Odisha-Bengal leg of the pipeline, it appears to be a replica

of the Contai- Paradip pipeline that was recently auctioned by the PNGRB.

This pipeline proposes to source gas both from the upcoming H-Energy LNG terminal near Haldia, and the

terminal at Dhamra.

Four companies, including the Adani Group, H-Energy and state-owned IOC, participated in the tender,

indicating no dearth of interest.

The regulator found the winning (lowest) bid too aggressive for comfort and decided to invite fresh bids.

The decision is now being reviewed by the Calcutta High Court and an appellate tribunal.

So, will there be two parallel pipeline projects on this stretch, or does the Centre intend to curb

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