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Narendra Modi govt makes big push for gas usage, MD BC Tripathi says ‘GAIL has big role to play’ in powering plan
- Created on Monday, 13 February 2017 08:33
There is a push from the government to increase the use of gas in the country to raise its share in the energy basket from the current 6.5% to 15%, and GAIL (India) will have a big role to play to achieve the goal. In an interview with Saurabh Kumar, GAIL’s chairman and managing director B C Tripathi talks about the company’s plan to spread its pipeline network across the country to increase consumption and move towards cleaner energy.
How has the Union Budget been for the oil and gas sector?
In the gas sector, the first important thing that happened was the reduction in customs duty, given almost 40-45% gas is imported. This may be seen as moving towards zero duty, which could be announced in the next Budget or maybe when GST comes. Second is the government’s support for developing pipelines in east India under the Pradhan Mantri Urja Ganga project which will help expand the reach of gas in the country in the five states and also help to reach out to the North-East when we plan to connect it there. Third, of course, is the merger of oil companies to create a large entity.
How much will the reduction in basic customs duty on LNG to 2.5% from 5% translate to in terms of savings for companies?
The power sector was already exempted from customs duty, but the import of the sector comparatively is very low. Largely the import, around 70-80%, is for other sectors such as fertilisers, CGD, textile, ceramic and petrochemicals, among others. Roughly, around R1,000 crore may be the reduction in cost for all consumers put together.
Will it percolate down to end-users?
Of course, as duties are all pass-through in the contract. It will definitely benefit consumers as it is a reduction in input cost. This entire R1,000 crore will pass on to the end-users and large industries such as fertilisers will gain more as their consumption is higher. The exact savings will vary from industry to industry.
Is there a concrete plan to connect the North-East?
The government has developed a North-East vision document which talks of connecting the region with pipeline and work is on. Some concept plan, sizing and costing are being worked out. The Jagdishpur-Haldia-Dhamra-Bokaro pipeline has the capacity to supply gas once it is connected to that region without laying any extra pipe. That provision has been already made in the pipeline. We are already going up to Barauni and if we extend it from there, all we will need is a compressor for higher pressure to supply. That is the normal way of expanding capacity of pipelines. While designing this pipeline, we already factored in that requirement. Though there is no timeline for the North-East, the first phase of this pipeline will be completed by December 2018 and the second phase by mid-2020.
How will the merger of state-run oil companies affect GAIL?
There are good examples of such exercises and bad examples too. But as a concept, it is very good. Since you will have a large entity, you have multiple advantages. It gives you scale and the financial muscle to reach out. It provides synergies in various sectors. It reduces unnecessary duplication of infrastructure at times. It gives you financial strength where you could talk about bigger scale as sometimes many of the projects we look at, individual companies lack financial muscle.
So, the balance sheet will be comfortable enough for us to take those big projects. If you look at the global growth of oil and gas, it says 70% of growth in oil and gas is going to come from China and India. It means that one has to think of big-ticket acquisition, sourcing and infrastructure. With this, it will help us to think big and also the reach, both in terms of financial and physical, will be bigger. The resources will be optimally utilised. The other side is the management. There are different types of skill sets and if they are properly used in different segments as departments or subsidiaries, it will create synergies. Today, we do not know what will be the structure. That needs deliberation and discussion with all stakeholders under the guidance of the government.
There is sudden interest in LNG. What is the reason?
As a country we need to expand the LNG import capacity. Does it synchronise with the demand or does it precede the demand is a matter probably we need to think upon. As of now GAIL has enough capacity and terminals at Dabhol, Kochi, Ennore, Kakinada, Dhamra and Mundra are going to come up in a phased manner. With each passing year, one terminal will be ready. At the same scale, we need to create demand and consumption in the country. And since east to west of the country is a long distance, it is advisable to have terminals spread across the coastline. After all these terminals are operational, GAIL’s capacity will be 50 million tonnes.