The project was to connect Kochi-Mangalore via seven districts of Tamil Nadu.
The government said it would not allow the company to lay the pipeline on agricultural land and asked the company to use roadsides along the National Highways.
More From This Section
Replying to a special calling attention motion on the issue by opposition parties, including DMK, Chief Minister J Jayalalithaa said her government would not encourage projects affecting people's welfare.
She said GAIL should also close down pits dug for the project, restore them to their original shape and give them to farmers and land owners.
These issues would also be intimated to the Madras High Court, which is looking into the matter, she said.
"Nobody will accept any justification that industrial growth should be attained at the cost of farmers...My government is determined that projects are for people and not the other way around," she said, adding steps would be taken to withdraw cases filed against farmers in this connection.
Jayalalithaa's statement comes in the wake of a three-day consultation the government had with affected farmers recently.