Govt Looks to Split GAIL into 2 Units, Separate Marketing Operations

Amid talks of merger of public sector oil and gas companies, the government is considering a proposal to split GAIL (India) with the marketing operations spun off into a separate company. Sources told TOI that the plan is being discussed in the petroleum ministry as the centre is unhappy with the state-run player's performance in building a pipeline network in addition to a possible conflict of interest in its role as the infrastructure provider as well as a carrier.

Natural gas transmission and marketing are the core businesses of the PSU, which has also diversified into petrochemicals and renewable energy. Last year, GAIL earned over 70 percent revenue from marketing operations, while over 40 percent of the profit came from natural gas transmission. The discussions come at a time when the government is working on completing ONGC acquisition of Hindustan Petroleum Corporation to bolster both the entities.

"It is like building a road and also deciding who can play and at what cost," said a source. The plan to split the company, which was set up mainly to develop gas sector infrastructure in the country, has been discussed in the past too, including by Atal Bihari Vajpayee government, but it did not materialise.

The deal will help the government garner around Rs 35,000 crore by way of disinvestment receipts. While other merger plans will wait until the next year, Bharat Petroleum and Indian Oil have made a pitch to take over GAIL, a news agency reported last month. The sources, however, said the government would first prefer to unbundle GAIL before deciding on consolidation.

"By this time the entire country should have had a pipeline network but we have been very slow," said a source, adding that pipelines and delivering gas at doorsteps is a major thrust of the Narendra Modi administration. Although the government is discussing the plan, sources clarified, there is no formal decision on the issue, which will be finalized only after consultation with all stakeholders.