Gujarat Petronet fined $2m for pipeline delays

Vol 19, PW 14 (24 Mar 16) People & Policy

Five years ago Gujarat State Petronet was awarded three cross-country gas pipeline projects by the PNGRB with a 2014 completion deadline.

But so far not even an inch has been laid. For some time the gas regulator has been thinking of penalising the company and today it looks like it has finally reached breaking point.

Frustrated, the PNGRB on March 9 encashed 25% or Rs13.8cr ($2m) of GSPL's Rs55.2cr ($8.3m) Performance Bank Guarantee. By a deadline of March 24 GSPL must 'top up' the Performance Bank Guarantee account to the mandatory 100% level or face the consequences.

"Every time GSPL came up with a new excuse," reports a PNGRB source. "We were sick and tired." Much to the consternation of rival GAIL, GSPL was awarded the three pipeline contracts on May 18, 2011: an 1881-km pipeline from Mallavaram in Andhra Pradesh to Vijaipur in Madhya Pradesh, that passed through Bhilwara in Rajasthan; a 1670-km pipeline from Mehsana in north Gujarat to Bhatinda in Punjab; and a 750-km pipeline from Bhatinda to Srinagar in Kashmir through Jammu, also in Kashmir.

Included in the Rs13.8cr PNGRB penalty is Rs5cr ($750,000) each for the Mallavaram to Vijaipur and Mehsana to Bhatinda pipelines and Rs3.8cr ($570,000) for the Bhatinda to Srinagar pipeline. GSPL (52%) leads a dispirited consortium of IndianOil (26%), Hindustan Petroleum (11%) and Bharat Petroleum (11%).