GAIL wants local partners for CGD operations

Vol 14, PW 2 (15 Jul 10) Midstream & Downstream

GAIL is unhappy with the retail gas joint ventures it has set up with state-owned refiners BPCL, HPCL and IndianOil.

In future, says GAIL, it will partner only local government bodies. Insiders tell us GAIL is re-evaluating its strategy of joining the three state-owned refiners for city gas distribution businesses because they delay decisions and lack enthusiasm for the gas sector.

“Gas is a secondary business for these people,” explains a GAIL source. “But for us it is our primary business.

They see the gas business as a threat to their core businesses of selling petrol and diesel. They don’t want to shoot themselves in the foot.

” Until now, GAIL has meekly followed oil ministry orders to set up Indraprastha Gas in Delhi with BPCL; Bhagyanagar Gas in Hyderabad with HPCL; Aavantika Gas in Madhya Pradesh with HPCL; and Green Gas in Lucknow with IOC. Learning the hard way, it has seen first-hand how its partners view gas sales as a low priority and how they argue against dedicated CNG stations, preferring instead shared facilities with petrol and diesel outlets.

GAIL believes this approach is wrong, as dedicated CNG stations give the gas business a clear focus and help it grow. In future, GAIL says it will set up gas retail JVs only with local state government bodies that can help it manage problems with local bureaucracy.

“It makes business sense to have state government companies on your side,” says GAIL. “Local clearances and approvals come much faster, making life easier.

” In April, GAIL took a first step with its new policy by agreeing a JV with Kerala State Industries Development Corporation. “The shareholders agreement, memorandum and articles of association and other documents are being worked on now,” we hear.