GAIL shouldn't have encashed GSPC money

Vol 17, PW 20 (22 May 14) People & Policy

Narendra Modi's election as Indian PM on May 16 is making GAIL officials anxious about how they've been treating GSPC, his favourite company.

Last month (April) GAIL encashed a Rs100cr ($17m) bank guarantee from GSPC after winning a Supreme Court case in March over a gas supply and transportation agreement. GAIL and GSPC have long had a bitter relationship.

But some argue GAIL's latest move was a 'blunder' and that it should have worked out a payment arrangement agreeable to GSPC, a fellow state-owned company. “GAIL management didn't know junior officials in the marketing department encashed the bank guarantee,” we hear.

“GSPC is a 'privileged company'.” GAIL hopes to make amends with GSPC by reviving a contract to supply 1.75m cm/d from Qatar.

GAIL and GSPC signed a Gas Sale Agreement for 15 years in February 2004, with GAIL agreeing to supply gas till 2019. But the contract lapsed after January 1, 2014 when the two companies failed to agree a revised gas price.

Senior GAIL managers wonder aloud if Modi's election will affect chairman BC Tripathi's five-year extension to July 31, 2019, granted by the previous Congress-led government. "Tripathi's extension should have been the new government’s decision," says an official.

But a GAIL source believes there is unlikely to be any move to remove Tripathi from his post.

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