GAIL India is planning a joint venture with the Gujarat State Petroleum Corporation for the distribution of piped natural gas and compressed natural Gas distribution in Gujarat.
GSPCL, the nodal agency of the state government for the oil and gas sector, earlier this month had signed a gas purchase agreement with GAIL, an LNG buyer from Petronet LNG's Dahej terminal.
"We have received a proposal from GAIL to form a joint venture. We are at present examining the proposal. The plan also needs to be approved by the state government and the GSPCL board," said D J Pandian, managing director, GSPCL.
Pandian held discussions with B S Negi, director of GAIL, on the joint venture plan. Negi was in the town to attend a brokers' meeting called over the sale of its 84,565,160 equity shares of Rs 10 each constituting 10 per cent of the paid-up equity share capital.
GAIL holds the distribution rights of CNG and PNG in Rajkot and Surendranagar and the company is expected to start gas distribution in the next one year.
GAIL had also shown interest in getting gas distribution rights in Ahmedabad and Vadodara. However, the rights were awarded to the Ahmedabad-based Adani group.
"By 2008, GAIL plans to set up PNG and CNG distribution networks in 22 cities including the Blue Sky project which covers five cities and the joint venture model will be tried everywhere. As setting up such massive distribution networks will call for huge investments, the joint venture model will help GAIL to save money. It will also help the company to utilise the infrastructure of its partnering companies," said a source in GAIL.
GAIL, if it goes alone for setting up gas distribution network in 22 cities, will need to invest around Rs 13,200 crore (Rs 132 billion) as setting up of PNG and CNG distribution networks in each city will cost around Rs 600 crore (Rs 6 billion).
It is also learnt that GAIL is considering gas distribution in other cities of Gujarat, though the distribution rights for most of the major cities and towns have already been awarded by GSPCL to companies such as Bharat Petroleum Corporation Ltd and to Adani group.
BPCL holds the gas distribution rights in Mehsana and Gandhinagar, while Gujarat Gas Company is the distributor in Surat.
The gas distribution rights for Vapi and Ankleshwar will be awarded soon.