Pradhan worried as GAIL posts poor results

Vol 19, PW 26 (08 Sep 16) People & Policy

Under pressure from oil minister Dharmendra Pradhan, GAIL is desperate to reverse a decline in profits after two years of poor financial results.

Last month (August) Pradhan held a series of meetings with GAIL management and asked it to improve efficiency and cut costs. GAIL chairman BC Tripathi must now prepare for difficult questions from shareholders at the company's 32nd annual general meeting on September 23 at the Manekshaw Centre in Delhi.

From a turnover of Rs57,245cr ($8.6bn) and a profit after tax of Rs4375cr ($658m) in 2013-14, turnover fell to Rs56,569cr ($8.5bn) and profit after tax dropped to Rs3039cr ($457m) in 2014-15. In 2015-16, the situation further deteriorated with turnover dropping to Rs51,614cr ($7.75bn) and profit after tax sliding to Rs2299cr ($346m).

"A number of factors have hit us hard," admits a GAIL source. Chief among them was the high-priced LNG Petronet-LNG was importing under its 25-year deal with RasGas.

GAIL is the biggest Dahej off-taker of R-LNG with a 60% share in the long-term contract. But at nearly $13/mmbtu the R-LNG price had become prohibitively expensive for GAIL's customers, mostly power stations and factories.

Things could have been worse in 2015-16 if RasGas under pressure from the Qatari and Indian governments had not agreed to renegotiate the contract and slash LNG prices by more than half from January 1, 2016.