GAIL plans to spin off marketing business in India

The Gas Authority of India Ltd. (GAIL) is planning to spin off its marketing business into a separate firm by April 2009 to comply with guidelines set by India’s Petroleum and Natural Gas Regulatory Board. The new entity could be called GAIL Gas (GGL), and it will maintain a separate account from GAIL India. Other businesses such as petrochemicals, however, will remain under GAIL India. The aim of the spin-off is to curb the ability of integrated companies like GAIL from cross-subsidizing their activities, which gives them a competitive advantage over other companies trying to break into the sector. The spin-off could facilitate private investment in gas marketing, which would help the government in its strategy of reducing dependence on crude oil, over 75% of which has to be imported. GGL’s initial investment strategy is focused on the construction of compressed natural gas (CNG) stations in India, which promises significant returns given more competitive pricing for CNG in comparison to gasoline and diesel. (March 26, 2009)