GAIL to set up subsidiary for CNG and City gas distribution

Thebullishtrends: GAIL share price closed today at Rs.420.60. GAIL has announced after the tradiing hours that the Board of Directors of the Company in its meeting held recently has accorded approval for setting up a subsidiary Company for City Gas Distribution (CGD) and CNG corridor business.

The initial equity in the subsidiary Company will be Rs 200 crore and corresponding to this equity amount, Debt shall be arranged amounting to Rs 300 crore (considering 1.5: 1 Debt: Equity ratio). The formalities for registering the Company and commencement of business have also been initiated.The subsidiary Company will take up Distribution and Marketing of CNG as fuel for vehicles (inter city as well as intra city), Piped Natural Gas for domestic/ commercial/ industrial purposes and Auto LPG as fuel for transport vehicles in the various cities of India and abroad. The subsidiary Company will also take up investment in and setting up of infrastructure, in the various cities of India and along the national highways for building CNG corridors which includes, among others, natural gas compressor stations, laying of the pipelines from City Gate Station(s) to the consumption areas and associated facilities, setting up of distribution points / retail outlets for CNG/ Auto LPG and transport gas through mobile cascades/ lorries.

The new subsidiary will also carry out allied retail business activities at CNG / Auto LPG retail outlets within the cities and along the highways. The subsidiary will also form alliances with Gas Producers/ Strategic Partners for implementation of the City Gas Projects as per the strategic decisions taken by GAIL.The existing joint venture Companies would continue to operate as at present. However, GAIL will have the option to transfer its shares in the existing City Gas Distribution Joint Venture Companies as also the assets in Agra - Ferozabad Local Distribution Network to the subsidiary Company.

The new subsidiary will also take up the CNG Corridor Project which involves an estimated capital outlay of Rs 35 crore for setting up CNG stations along the highways. GAIL has identified 230 cities contiguous to existing and proposed pipelines for City Gas Distribution in phased manner. In first phase, seventeen cities have been identified to be taken up through its subsidiary Company with authorization from Petroleum and Natural Gas Regulatory Board (PNGRB). The subsidiary Company would take up directly with PNGRB towards the authorization and execution of CGD projects throughout India.The subsidiary will have the distinct advantage of access to GAIL's existing network of over 6700 km and proposed network of around 5500 km across the country.