Date:05/12/2005 URL: http://www.thehindubusinessline.com/2005/12/05/stories/2005120502640100.htm

Back Decision on bifurcating GAIL's marketing, transmission biz soon

Richa Mishra

New Delhi , Dec 4

A FINAL decision on bifurcating the gas marketing and transportation business of GAIL (India) Ltd seems to be near with the Government hoping to get Parliamentary approval for setting up the proposed Petroleum Regulatory and Natural Gas Board (PRNGB).

According to a senior Petroleum Ministry official, the regulatory board would take a final call on whether GAIL needs to separate its gas trading business from gas transmission activities.

The Petroleum Ministry, which has got the Group of Minister's approval on the Bill to set up PRNGB, is hoping to introduce the Bill during the ongoing winter session of Parliament.

While the Bill would only lay down the provision for an affiliate code of conduct, the proposed Board would prescribe the mechanism for unbundling, if any, he said.

GAIL, which is currently undertaking both gas marketing as well as transmission activities, would be required to separate its gas trading business from transmission activities as the gas markets move towards maturity.

Such unbundling of business would be in the greater interest of development of competitive gas industry, the official said. Incidentally, in anticipation of such a move once the Regulatory Board comes into existence, GAIL has already started maintaining separate accounts for its gas transmission and trading business.

The unbundling pattern would also need mandatory approvals before its implementation, the official said. This move is in keeping with industry demand of good practices, so that there was no conflict of interest. Currently, GAIL is a supplier as well as a consumer.

Unbundling was a three-stage process, the official said. Initially, trading transmission activities require to be separated within the organisation. This is followed by creation of separate business units to look after these two distinct businesses and, finally depending upon maturity of market a legal separation - separate companies are set up for trading and transmission businesses, he elaborated.

Asked whether the decisions taken by the proposed Regulatory Board would be binding on the companies, the official said that it would be binding and the Board would also have the authority to levy penalties.