GAIL Gas rejects criticism of aggressive CGD bids

Vol 12, PW 23 (23 Apr 09) People & Policy

GAIL’s retail gas subsidiary GAIL Gas has rejected criticism that it bid “ridiculously lowâ€‌ to wipe out competition and win four of six cities offered in India’s first ever city gas network bidding round.

“We bid strategically and aggressively,â€‌ a senior GAIL Gas source tells PETROWATCH. “There was no question of bidding too high or low.

Our numbers (for network tariff) in the first few years are certainly low.â€‌ This month, the Petroleum and Natural Gas Regulatory Board declared GAIL Gas the winner to build retail gas networks in Meerut, Kota, Sonipat and Dewas, leaving big names such as Cairn India with BPCL, Adani Energy with Indian Oil, Indraprastha Gas and GSPC Gas in the dust.

A decision on Mathura is still pending since GAIL Gas was the sole bidder. Kakinada – the landfall point for D6 gas was wrested by Bhagyanagar Gas from the only other bidder, Reliance.

Our GAIL Gas source points out that network tariff is just one component of the consumer price. “Our cash flows are dependent on consumer prices, not network tariff,â€‌ he says, adding that costs to the consumer will be governed by the price of alternative fuels.

“Our consumer prices will be between 15% and 20% cheaper.â€‌ Despite low network tariffs, says GAIL Gas, its proposed CGD businesses in Meerut, Kota, Sonipat and Dewas, “will be winning propositions even though the rate of return is initially low in the first five years of marketing exclusivity.

â€‌ But GAIL Gas says this tariff will rise from the sixth year onwards. “Our compression tariff is about the same as Indraprastha Gas,â€‌ he says.

GAIL Gas also refutes allegations it has been manipulated by Reliance to set up infrastructure at taxpayer expense for the countrywide sale of D6 gas. “This is not true at all,â€‌ he says.

“D6 gas is in the absolute control of the government of India; Reliance has no control over it (and) is unable to get any D6 gas for its own use even though it has been repeatedly requesting the government.â€‌

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