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Government explores leasing out GAIL's pipeline business to private sector players

Updated : July 09, 2019 19:33:31 IST

With Prime Minister Narendra Modi’s vision to make India a gas-based economy, CNBC-TV18 learns that NITI Aayog is of the view that oil and gas pipeline assets in the country need to be leased out to the private players to increase capacity utilisation.

Government’s think tank is of the view that GAIL’s pipeline business should be completely hived off from the parent company, as against the proposal of union petroleum ministry to demerge the pipeline business of GAIL into a 100 percent subsidiary.

GAIL owns and operates about 14,000 kilometres of pipelines and earns its maximum revenue through the marketing of gas than the pipeline business.

"Currently capacity utilisation of pipelines owned by GAIL is below 60 percent. Once these assets are tendered for recycling, not only will it generate cash for the government-owned pipeline business, it will also bring private participation and ensure higher volumes are utilised in the same pipeline while balancing prioritisation of fuel movement across India," a source privy to the developments told CNBC-TV18.

"To begin with, GAIL’s pipelines will be up for asset recycling once the separation of the pipeline business is approved by the cabinet and later government may look at similar recycling of ONGC, IOC pipelines," said another source.

NITI Aayog has recommended recycling of about 30,000 kilometres of oil and gas pipeline and storage assets.

The idea of asset recycling is to lease out an asset or project for operation and maintenance or even forge equity/debt partnerships with the private sector and earn revenue from projects completed by PSUs without letting go of government’s ownership.

With investments drying up for greenfield projects due to various regulatory hurdles, recycling of assets will allow private sector investment and revenue generation for PSUs in the areas like roads, airports, electricity transmission, ports, oil and gas pipelines, fibre and telecom towers.

India’s gas-based energy consumption currently stands around 6.5 percent and aims to increase it to 15 percent by 2022, which will also aid in reducing pollution to an extent.
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