Wednesday, March 23, 2016

GAIL to get Rs 400-cr boost after hike in pipeline tariff

STATE-owned gas utility GAIL (India) may see its top line getting a boost of around Rs 406 crore after the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB) has hiked the tariff for its KG-basin pipeline from Rs 5.56/mbtu to Rs 45.3/mbtu, a sharp increase of 715 percent.
But the regulator is mulling the economic life only till February 2017. The new tariff is effectively valid for less than...
a year – April 1, 2016 till February 11, 2017.
The hike in tariff could translate to profit after tax of around Rs 272.4 crore, a leading financial daily quoted analysts as assessing.
Though KG network is one of the smaller networks of the Maharatna PSU, and accounts for less than five percent volume, this large hike itself can raise GAIL’s FY17 earnings by over three percent.
The tariff order indicates that while consumers had initially not participated in earlier three open houses in 2015, they had participated in the most recent open house in February 2016. In their submissions, key consumers have opposed issues (particularly economic life), which could raise tariff.
GAIL has substantially upgraded its network, and certainly extended the economic life for this network by many years. However, as the current tariff calculation methodology is rigid, the economic life of 25 years from network beginning, February 1992, has been considered.
GAIL is the largest state-owned natural gas processing and distribution company in India, based in New Delhi. It has the following business segments: natural gas, liquid hydrocarbon, Liquefied petroleum gas transmission, petrochemical, city gas distribution, exploration and production, GAILTEL and electricity generation. GAIL (India) Ltd was incorporated in August 1984 as a Central PSU under the Ministry of Petroleum & Natural Gas. The PSU was initially given the responsibility of construction, operation & maintenance of the Hazira – Vijaypur – Jagdishpur (HVJ) pipeline Project. It was one of the largest cross-country natural gas pipeline projects in the world. Originally this 1800 Km long pipeline was built at a cost of Rs 1700 Crores and it laid the foundation for development of market for natural Gas in India.
GAIL, after having started as a natural gas transmission company during the late eighties, has grown organically by building large network of Natural Gas Pipelines covering more than 10900 Km with a capacity of around 200 MMSCMD; two LPG Pipelines covering 2040 Km with a capacity of 3.8 MMTPA of LPG; seven gas processing plants for production of LPG and other Liquid Hydrocarbons, with a production capacity of 1.4 MMTPA; and a gas based integrated Petrochemical plant of 410,000 TPA polymer capacity which is further being expanded to a capacity of 900,000 TPA. The PSU also has 70 percent equity share in Brahmaputra Cracker and Polymer Limited (BCPL) which is setting up a 280,000 TPA polymer plant in Assam. GAIL has 32.86 per cent stake along with NTPC as equal partner in JV company, RGPPL at Dabhol which is house to largest gas based power generation facility and an LNG regasification terminal operated by GAIL. GAIL is a pioneer in City Gas Distribution (CGD) business in India, with Indraprastha Gas Limited (IGL) in Delhi and Mahanagar Gas Limited (MGL) in Mumbai being its biggest success stories. Besides IGL and MGL, GAIL has set up several JVs for CGD to supply gas to households, transport sector & commercial consumers in various cities including Hyderabad, Agartala, Kanpur, Indore, Vadodara, Lucknow, Agra and Pune. In 2008, GAIL incorporated a wholly owned subsidiary, GAIL Gas Ltd (GGL) to exclusively focus on city gas distribution business. GGL has been authorized for implementation of CGD projects in four cities namely Kota, Dewas, Sonepat & Meerut in the 1st round of bidding by Petroleum & Natural Gas Regulatory Board (PNGRB).
As a strategy of going global and further expanding global footprint, GAIL has formed a wholly-owned subsidiary company, GAIL Global (Singapore) Pte Ltd. in Singapore for pursuing overseas business opportunities including LNG & petrochemical trading. In US, GAIL has 20 percent working interest with Carrizo Oil & Gas Inc. in the Eagle Ford shale acreage, Texas through a wholly owned subsidiary GAIL Global (USA) Inc. GAIL is also an equity partner in two retail gas companies of Egypt, namely Fayum Gas Company (FGC) and National Gas Company (Natgas). Besides, GAIL is an equity partner in a retail gas company involved in city gas and CNG business in China.

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