GAIL's mega pipleline project faces regulatory hurdle; Stock caught in tight band

Last Updated: Mon, Nov 28, 2016 14:09 hrs

Shares of GAIL India Limited moving in a tight range today following the natural gas pipeline project awarded to th company by the government facing a regulatory hurdle.

At Rs 420, the stock is up 0.6% from its previous closing price. Earlier, the stock, which touched a low of around Rs 413, edged up to Rs 423.65 before turning quite sluggish.

The Petroleum & Natural Gas Regulatory Board has written a letter to the Ministry of Petroleum and Natural Gas, questioning the validity of the government's decision to to award the Jagdishpur - Haldia - Bokaro - Dhamra natural gas pipeline project to GAIL India.

So, the nearly Rs 13,000 crore project now faces a severe hurdle. The regulatory board says in its letter that no gas pipeline or city gas distribution network could be laid, built, operated or expanded without its authorisation.

It also says the government cannot in any way impose directives on the regulator on awarding such projects to specific companies and that the government can ask it (the regulator) to invite applications from interested entities to carry out the project in a transparent and objective manner. The board has referred th provisions under PNGRB Act 2006 in this regard.

The pipeline project was proposed to supply natural gas to the cities of Varanasi, Patna, Ranchi, Jamshedpur, Bhubaneswar, Kolkata and Cuttack and to supply gas under the Rs 18,000 crore Hindustan Urvarak Rasayan projects that the Prime Minister Narendra Modi had promised in Uttar Pradesh, Bihar and Jharkhand.

In a letter to the regulator, the Ministry of Petroleum and Natural Gas said the government would issue a policy directive to PNGR under Section 42 of the PNGRB Act to authorise Gail to develop city gas distribution networks along with the pipeline project.

The board's letter said the city gas distribution network development and natural gas pipeline development are two distinct operations well defined in the PNGRB Act, 2006 and that any policy directive of authorising the city gas network and the natural gas pipeline may create precedence for existing natural gas pipeline operators and future projects.

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