KOLKATA (miningweekly.com) – Acceding to the demands of gas logistics and transportation major GAIL India Limited, the Indian government has agreed to the funding of $1.82-billion for the construction of a 2 539 km gas pipeline traversing the northern and eastern Indian provinces.

GAIL, which had initially been apprehensive over the offtake of gas from its planned network and the viability of its investment, would now be able to achieve financial closure  and bring gas to at least three defunct fertiliser plants, noted an official in the Oil and Natural Gas Ministry, who added that the blueprints for the revival of these plants were already ready and approved.

Last month Mining Weekly Online reported that GAIL had sought full government budgetary support for the construction of the pipeline project, as GAIL was not expected to guarantee the minimum 12% internal rate of return – the benchmark for private sector capital investment in the gas logistics major.

The pipeline will be constructed in three phases, with the first phase scheduled for completion by 2018, with capacity of 16-million metric standard cubic meters a day (mmscmd), which will be ramped up to 32 mmscmd on completion of the entire length of the pipeline.

Significantly, the pipeline project had been conceived as far back as 2004, though GAIL had delayed implementation, unsure of natural gas demand along the pipeline hinterland, as no gas-consuming projects had been finalised at the time.

The defunct fertiliser plants up for revival along the GAIL pipeline include Gorakhpur, in Uttar Pradesh; Barauni, in Bihar; Sindri, in Jharkhand; and Durgapur and Haldia, in West Bengal.

Ministry officials informed Mining Weekly Online that close on the heels of agreeing to offer funds to GAIL for the pipeline project, and with assured feedstock guaranteed, the Union Cabinet of Ministers approved the revival of Gorakhpur, Barauni and Sindri.

The revival of the fertiliser projects would be implemented by a consortium comprising NTPC Limited, the largest power company in the country, Coal India Limited and oil refiner and marketer the Indian Oil Corporation. The total estimated cost of reviving the three plants is $2.69-billion.