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GAIL monopoly to go; Reliance to get pipeline rights
By siliconindia staff writer
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Wednesday, 04 August 2004, 19:30 IST
NEW DELHI: Government is likely to drop GAIL as the monopoly builder of trunk gas pipelines in the country and as part of opening up the sector, might allow Reliance Industries to lay a line from Andhra Pradesh to Gujarat.
Reliance will get the rights to lay the 1,400-km pipeline from Kakinada in Andhra Pradesh to Ahmedabad in Gujarat, via Hyderabad and Uran in Maharashtra, to transport natural gas from its gigantic gas field in Bay of Bengal to NTPC's Kawas and Gandhar power projects in Gujarat.
Official sources said the Petroleum Ministry is likely to announce the final gas pipeline policy this month wherein laying inter-state pipeline will be open for competition and anyone offering "the least terms of transportation tariff" and "most efficient means of operations" would get the contract.
All pipelines, laid on common carrier principle, should have at least 25 per cent more capacity than what is required by the owner for leasing to third party users.
In September 2003, a draft gas pipeline policy nominated GAIL as the sole transporter but the industry saw it as a conflict of interest with GAIL also involved in gas production and trading. They feared that a monopoly status would give GAIL the power to arbitrarily fix tariffs, although a regulatory body would monitor price movements.
Basing its arguments on the draft policy, GAIL had claimed the right to lay the Kakinada-Ahmedabad pipeline.
Sources said the Government was contractually bound to allow Reliance to lay a pipeline to market produce from the D6 Block it won through competitive bidding.
Sources said Reliance chairman Mukesh Ambani had last month met Petroleum Minister Mani Shankar Aiyar to impress upon him that Kakinada-Ahmedabad pipeline was crucial for the company to fulfil the contract it had won from NTPC for supply of gas for 17 years at a delivered price of $2.97 per million British thermal unit (mBtu).
Later on July 27, he wrote to the minister saying Reliance was in discussion with GAIL on laying the pipeline but talks broke down "due to lack of transparency and competitiveness" at GAIL's end.
Ambani said: "we have proposed to lay this pipeline in a separate subsidiary to comply with all the norms laid down by the proposed regulatory authority and abide by common carrier principles."
Gas Transportation and Infrastructure Company Ltd, a subsidiary of Reliance, is the first company to have sought approval for ROU for the pipeline project in 2001-02, much prior to the announcement of Draft Pipeline Policy.
GTICL wants to build Kakinada-Hyderabad-Uran-Ahmedabad gas pipelines originating from Jamnagar to connect the proposed regassification terminal at Jamnagar, RIL's block in Saurashtra and Kutch region, and its east coast blocks, sources said.