KOLKATA (miningweekly.com) – India’s State-owned natural gas marketer and infrastructure provider, GAIL India, is seeking to diversify into ‘core’ and ‘noncore’ business verticals that extend from solar power generation and electric vehicle charging stations to water transportation pipelines.
The natural gas logistics major will also explore investment opportunities using its free cash reserves to fund start-up businesses in natural gas and petrochemicals, extending GAIL’s existing capabilities in energy and operating petrochemical complexes across the country.
GAIL will seek shareholders’ approval to amend the memorandum of association of the company at the forthcoming annual general meeting scheduled for September 11, according to a notice issued to shareholders.
“The investments can be made through special purpose vehicles, alternate investment funds or fund of funds,” the notice said.
“There is a necessity to adopt a new, different pathway to provide clean, cost-effective and efficient mobility services that are safe, reduce dependence on imported oil and achieve a more efficient land-use in cities with the least environmental footprints and impact on human health. With the objective in mind, GAIL wants to set up battery charging stations and provide charging facilities to electric vehicles,” the notice said.
GAIL, which operates about 14 000 km of natural gas and liquefied natural gas pipelines across the country, and with projects for constructing another 4 500 km in hand, reckons it can leverage its existing ‘right-of-way’ to construct electric vehicle charging points along its pipeline network.
At the same time, with acute scarcity of water resulting from uneven distribution of monsoon rains across the country and fast depleting groundwater resources, urban centers have to transport potable water over greater distances and GAIL sees this to be a business opportunity to leverage its natural gas transportation expertise to deliver water from source to urban consumption points.
Although not officially acknowledged, GAIL's diversification into core and noncore business verticals has been prompted by uncertainties over its continuing both businesses of gas marketing, as well as transportation.
As reported by Mining Weekly Online earlier, the government has been keen to hive off GAIL’s pipeline business as a precursor to setting up an Indian natural gas trading hub and eliminate the possible conflicts of interest between GAIL acting as a gas marketer while having dominant control of gas distribution infrastructure.
The Petroleum and Natural Gas Ministry, in response to GAIL’s opposition of hiving off the distribution business, has put such a proposal on the backburner.
However, with a gas trading hub on the anvil by current year-end, the option of converting GAIL’s gas distribution business under a wholly-owned subsidiary was being considered as an alternative with firewalls between the company’s marketing and distribution activities.
In such a case, the diversification project would enable GAIL to prevent significant shrinkage in its balance sheet following the creation of a subsidiary of its distribution businesses, government sources added.