Oil Minister Dharmendra Pradhan today said IOC and BPCL are both keen to acquire gas utility GAIL India Ltd, which as per the extant policy needs to be split by separating gas transportation business from its marketing unit. IOC and BPCL have separately indicated to the petroleum ministry their interest in taking over GAIL to add natural gas to their oil refining and marketing business.
In a written reply to a question in Rajya Sabha, Pradhan said Finance Minister Arun Jaitley in the 2017-18 Budget unveiled government's plan to create integrated public sector oil majors "through consolidation, mergers and acquisitions" so as that the merged company has "capacity to bear higher risks, avail economies of scale, take higher investment decisions" and is "able to match the performance of international and domestic private companies".
"Indian Oil Corporation Ltd (IOCL) and Bharat Petroleum Corporation Ltd (BPCL) had written to the Ministry for integration with GAIL (India) Limited. However, government has not taken any decision in this regard," Pradhan said. To a separate question on splitting GAIL, he said a decade-old policy provides for a natural gas transporter not having any interest in marketing of the fuel. Incorporated in August 1984 by spinning off gas business of ONGC, GAIL (India) Ltd owns and operates about 11,000-km of natural gas pipelines in the country. It sells around 60 per cent of natural gas in the country.
Pradhan said in 2006, the government issued the Policy for Development of Natural Gas Pipelines and City or Local Natural Gas Distribution Networks. "In the long run and with the maturing of gas markets, it is envisaged in the policy that the authorised entities will have transportation of natural gas as their sole business activity and will not have any business interest in the gas marketing or city or local gas distribution networks," he said.
Also, the policy and the provisions of the Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 provide for all entities authorised to lay pipelines including GAIL to provide mandatory open access to their gas pipeline infrastructure on common carrier principle at non-discriminatory basis. This open access to third parties should be given at transportation rates determined by PNGRB, he said. The minister however did not say either way if the government was considering splitting GAIL.
Last month, Pradhan had stated that the state-run firm should focus on building natural gas pipelines as marketing can be done by "anyone". He had stated that creating infrastructure to take environment friendly natural gas to uncovered parts, particularly eastern India, is a priority for the government. Several meetings have been held in the ministry on splitting GAIL by spinning off its marketing business into a separate company and selling it to a state-owned firm.
GAIL also owns a petrochemical plant at Pata in Uttar Pradesh which too could be sold along with the marketing business to either IOC or BPCL. The company had in the past resisted the split on grounds that its gas marketing and transmission businesses operate at arm's length, and hence do not need to be separated. GAIL's marketing business formed 71 per cent of its 2016 -17 total sales, and 25 per cent pre-tax profit. The government has a 54.89 per cent stake in GAIL India.