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'Good thing in budget'
July, 25th 2009

It took 15 years and a huge gas discovery in the Krishna-Godavari basin to establish natural gas as the fuel of the future. In a telephonic conversation with Rajeev Jayaswal of ET and Supriya Srinate of ET Now, GAIL India chairman & managing director UD Choubey recounts the difficulties he faced years ago to convince consumers about the significance of the clean fuel. Excerpts:

Indias gas production is expected to double by the end of this year, but there is no adequate pipeline infrastructure to transport it. Has GAIL been caught napping?

GAILs efforts to have a nationwide network of pipelines started about seven years ago. For the first five years, GAIL was not authorised (by the government) to lay even a single pipeline. Five crucial years were missed.

In the last two years, we could take up four projects in two phases. The first phase of pipelines will be ready by 2009-10 and the second phase by 2011-12. A financial commitment of Rs 12,000 crore has been already made.

Worried about the lack of pipeline infrastructure, the oil ministry has proposed to lay nationwide natural gas highways. Do you see any role for GAIL in this?

The natural gas highway project is the brainchild of the petroleum secretary. I have discussed it with him. His intention is to take gas to every nook and corner of the country so that under-developed regions also see industrial growth.

GAIL is the ideal choice for implementing this project as it was created to have gas transportation infrastructure. We will be able to deliver because we have the necessary pipeline expertise and project management skills. Secondly, the project would require approximately Rs 25,000 crore. And we will be able to do it with the help of the government.

What are the major concerns in the development of gas pipeline infrastructure in the country?

Today, we have 7,000 km of authorised natural gas pipelines in operation. But there are also about 1,500 km of unauthorised pipeline infrastructure. GAIL has raised this issue with the ministry as well as the downstream regulator.

The budget has provided for investment allowance in place of the seven-year tax holiday on pipeline infrastructure. Will this move attract investments to the sector?

At first glance, it sounded as a major benefit to investors. But we realised later that this would not work as an incentive. In the pipeline business, we start earning very soon. In a period of two-three years, deferred tax starts. It would have been better if the entire natural gas was classified in the declared goods category (that would attract a 4% uniform state-level tax).

This would also benefit consumers as they would get natural gas at a cheaper rate. Even the government would gain as the cost of production of urea would come down, and consequently the level of subsidy on fertilisers. The only good thing in this budget for the gas industry was the proposal to set up natural gas highways.

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