Government gears up for gas trading hub, GAIL business to be separated

Updated : January 16, 2020 12:59 PM IST

The trading hub will ensure the price of gas based on demand.

The idea is to create an exchange under SPV where ownership will not be concentrated to a single company.

A fresh note has been floated by Ministry of Petroleum and Natural Gas for comments from various ministries with regards to bringing a gas trading hub, sources told CNBC-TV18. The note on the gas trading hub also includes separation of GAIL’s pipeline and marketing business to ensure there’s no conflict, the sources said.

The gas trading hub will be similar to power exchange and trading will be based on market forces. A special purpose vehicle (SPV) will be floated for creation of gas trading hub ensuring not one or single company has majority ownership, the sources, who did not want to be named, told CNBC-TV18.

The trading hub will ensure the price of gas based on demand. The idea is to create an exchange under SPV where ownership will not be concentrated to a single company.

Ministry of Petroleum and Natural Gas is of the view that the subsidiary business of pipeline will not be divested by the government for next 3-4 years as it is already engaged in crucial pipeline projects to ensure gas grid plan is achieved, the sources said.

According to the sources, the ministry is in favour of allowing the trade of domestically produced gas once priority sector requirements are met. The ministry will also likely include gas-based stranded power plants under priority sector gas allocation from domestic sources.

Priority sector gas allocation currently is for the liquified petroleum gas (LPG), fertiliser, city gas distribution (CGD). About 25,000 MW capacity is stranded in the power sector due to lack of gas supply.

Government gears up for gas trading hub, GAIL business to be separated

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