Govt. says no plan to bifurcate marketing and pipeline operations of GAIL

The government has dropped its plan to split gas transportation utility GAIL into two by unbundling its marketing and gas transportation operations.

In a written reply to a question on Gail bifurcation on Monday, Oil minister Dharmendra Pradhan said that no such proposal was under consideration at present.

He said that GAIL is executing projects related to expansion of gas infrastructure in the country involving setting up pipeline, LNG terminals, City Gas Distribution & Compressed Natural Gas retail network in the country.

To address the issue of conflict of interest where GAIL acts as both seller and carrier of gas, it was earlier proposed that the gas transporter would separate out accounts of gas transportation and marketing operations while giving outside parties wider access to its vast pipeline network. The bifurcation proposal involved hiving off GAIL’s pipeline business into a separate entity.

Later another proposal involving putting pipeline operations of GAIL under an independent subsidiary was also considered. But both the proposals has been put in the backburner now.

Pradhan informed the house that GAIL has taken a number of steps to enhance its profitability. A company-wide cost optimization drive has been initiated to bring down the cost and improve operational efficiency during this uncertain business environment. Besides, digitization and process optimization drive has been started in the company to reduce response time and cost.

GAIL currently has the monopoly both in terms of marketing and transportation of gas. This creates conflict of interest and affects discovery of competitive gas pricing. One of the reasons for unbundling was that some industry players alleged that GAIL was not giving them access to its 11,000-kilometer pipeline network to transport their gas. But government is now setting up an independent gas transport system operator that will facilitate and coordinate of booking of common carrier capacity in all natural gas pipelines on a non-discriminatory, open-access basis.