GAIL plans arm for city gas supply

GAIL India, the country's largest transporter and marketer of natural gas, will set up a wholly owned subsidiary to sell gas to households, vehicles and industries in cities across the country.

IN THE PIPELINE

GAIL will register the new company in next 2-3 months

The government-owned gas utility has already identified 17 cities to bid for gas distribution rights, for which the new company plans to spend around Rs 500 crore

The company would have an equity capital of Rs 200 crore and borrow another Rs 300 crore for implementing its projects

The company will have a five-member board with GAIL chairman doubling up as the chairman of the new subsidiary. A separate chief executive officer will be appointed

The government-owned gas utility has already identified 17 cities to bid for gas distribution rights, for which the new company plans to spend around Rs 500 crore, Chairman UD Choubey said.

"The new company will bid for all new city gas distribution projects that the petroleum and natural gas regulator plans to offer," Choubey said, adding that the new company was yet to be named.

The company would have an equity capital of Rs 200 crore and borrow another Rs 300 crore for implementing its projects, said Choubey.

GAIL will register the new company in next 2-3 months. "Afterwards we will consider listing the company on the stock exchanges," Choubey said. The company will have a five-member board with GAIL chairman doubling up as the chairman of the new subsidiary. A separate chief executive officer will be appointed.

"The setting up of the subsidiary will also help in compliance with the requirement of unbundling of the marketing and transportation functions under the petroleum and natural gas regulations," Choubey said.

GAIL already has joint ventures with other gas companies for distribution in various cities across the country. GAIL's equity share in the existing joint ventures, such as Indraprastha Gas in Delhi and Mahanagar Gas in Mumbai, will not be transferred to the new company.

"That option will however remain open," Choubey said.

The new subsidiary will also take up a compressed natural gas (CNG) corridor project for setting up CNG stations along highways. Initial capital of Rs 35 crore has been earmarked for this project.

The share of gas for distribution to cities in the country is around 4 per cent of the total available. In European countries, almost 40 per cent of the available gas is supplied to retail customers in cities.