The Andhra Pradesh government has decided to restructure the equity pattern of the Krishna-Godavari Gas Network to include Reliance Gas Corporation, a subsidiary of Reliance Industries [Get Quote], as a majority partner of the consortium.

KGGNL, a special purpose vehicle set up for the development of the natural gas network in the state, is a joint venture of Infrastructure Corporation of AP, Gujarat State Petroleum Corporation and Infrastructure Development Finance Corporation.

It was constituted in September 2006 to develop a network of pipelines to distribute natural gas from the Krishna-Godavari basin to all the districts in the state.

According to the restructured equity pattern, RGC will hold 67 per cent, while the state government, GSPC and IDFC [Get Quote] will have 11 per cent stake each. At present, IDFC has 48 per cent stake. AP and GSPC have 26 per cent holding each. The state cabinet, which met in Hyderabad on November 11, approved the proposal to restructure the equity pattern.

The original equity base of KGGNL stood at Rs 100 crore (Rs 1 billion). However, an Incap top executive told Business Standard that there would be a substantial increase in equity following the induction of RGC, the details of which were now being worked out.  

According to Union Information Minister A Ramnarayana Reddy, the state government has decided to make RGC a consortium partner as it is the only company that can start supplying gas immediately. RGC has struck huge gas reserves in the K-G basin.

"Due to certain developments regarding the availability of natural gas in the K-G basin, it is observed that GSPC may not be able to supply gas until at least 2011-12, which means that KGGNL has to wait for three more years if it has to develop the gas network," the minister said.

Keeping this in view and to expedite city gas distribution in the state, the state government has decided to rope in RGC, he added. Briefing newspersons following the cabinet meeting, Reddy said the restructured KGGNL would soon submit bids to the Petroleum and Natural Gas Regulatory Board, constituted by the central government, for laying the gas distribution network. The board has already received bids from RGC to lay the gas pipeline network in Hyderabad, Kakinada, Tirupati, Vijayawada, Visakhapatnam and Rajahmundry.