Indian Oil Corporation and Bharat Petroleum Corporation have backed out of Gas Authority of India Ltd's Vizag-Secunderabad LPG pipeline.
"IOC and BPCL have refused to sign the transport service agreement for the Rs 490 crore LPG pipeline as Gail has insisted on strict take-or-pay clause," official sources said in New Delhi.
When contacted Gail chairman and managing director P Banerjee said so far, only Hindustan Petroleum Corporation has signed TSA.
Without the TSA, the 600-km Vizag-Secunderabad pipeline, which is expected to be completed by July, would be a non-starter.
The pipeline was for transporting LPG imported at Vizag port and that produced at HPCL's refinery to bottling plants falling en-route from Vizag to Secunderabad.
Banerjee said Gail is mulling converting the LPG pipeline into a natural gas carrier for transporting gas from recent discoveries in offshore Andhra Pradesh.
Gail has carried out an analysis which indicates that importing LPG at Vizag and transporting it to the bottling plant of oil companies by pipeline would be cheaper than the present scenario of road and rail transportation of LPG from different sources, he said.
Sources said IOC and BPCL cited product availability for backing out of the pipeline. They are opposed to stringent take-or-pay clause proposed by Gail (the two companies will have to pay transportation charges even if no LPG was moved).
